TaxTMI Updates e-Newsletter
Apr 02,2022

Bail - Self-incriminatory statement under Section 70 of the C.G.S.T. Act, 2017 - Parity in grant of bail - Non-tampering and non-influence of witnesses - Conditions of bail - Criminal history and bail consideration

Bail - Self-incriminatory statement under Section 70 of the C.G.S.T. Act, 2017 - Parity in grant of bail - Non-tampering and non-influence of witnesses - Conditions of bail - Criminal history and bail consideration - Applicant entitled to be enlarged on bail in Case Crime No.928 of 2021 registered by DGGI Ghaziabad under Sections 132(1)(b) & (1) of the CGST Act, 2017. - HELD THAT: - The Court considered the submissions that the applicant was falsely implicated, that his statement under Section 70 of the C.G.S.T. Act, 2017 was self-implicatory and said to have been extracted by coercion, that he had closed down offending firms following due process, that appeals in respect of other transactions were pending, and that he had no prior criminal history. Counsel also urged parity with a co-accused who had been granted bail. The State/complainant did not satisfactorily dispute these factual contentions and did not dispute the absence of prior criminal history. On this basis and without adjudicating the merits of the case or making observations on the alleged statement, the Court found merit in the applicant's submissions and held that bail should be granted. The Court directed release on furnishing a personal bond and two sureties to the satisfaction of the trial court and imposed conditions directed to preservation of the trial process, namely prohibitions on tampering with evidence, influencing witnesses, and on making inducement, threat or promise to persons acquainted with the facts, together with an obligation to appear when required; breach would permit prosecution to move for cancellation of bail before this Court.

Bail allowed subject to personal bond and two sureties and the specified conditions; prosecution may move for cancellation if conditions are breached.

Final Conclusion: Bail application allowed; applicant Rohit Rastogi to be released on furnishing personal bond and two sureties to the satisfaction of the trial court, subject to conditions to prevent tampering with evidence and influencing witnesses, and appearance obligations; prosecution may move for cancellation of bail on breach of conditions.

Non-filling of Part B of E-Way Bill - detention and penalty proceedings - relegation to adjudicating authority - opportunity of being heard - adjudication on merits not routine mechanical order

Non-filling of Part B of E-Way Bill - detention and penalty proceedings - adjudication on merits not routine mechanical order - opportunity of being heard - Petitioner relegated to the Adjudicating Authority for fresh adjudication of detention and penalty proceedings arising from alleged omission in Part B of the E-Way Bill, with directions to consider merits and permit hearing. - HELD THAT: - The Court declined to decide the substantive questions raised by the petitioner (including the interpretation of the expression "the business premises" and whether the omission of conveyance details in Part B was intentional or excusable) and observed that those matters fall within the domain of the Adjudicating Authority. The petitioner is permitted to place the same grounds, supporting documents and inputs before the Adjudicating Authority. The Adjudicating Authority is directed to objectively consider the materials, give the petitioner an opportunity of being heard, and avoid passing a routine or mechanical order. The Court therefore remanded the proceedings for fresh consideration on merits rather than resolving the dispute itself.

Proceedings remanded to the Adjudicating Authority to decide the detention and penalty matters on merits after affording hearing and considering the petitioner's submissions and supporting documents, within two weeks of receipt of this order.

Final Conclusion: Writ petitions disposed by relegating the petitioner to the Adjudicating Authority to raise the grounds earlier urged before this Court; the Adjudicating Authority to consider those grounds on merits after hearing and pass a reasoned order within two weeks.

Interest on delayed refunds - Statutory interest under Section-56 of the CGST Act, 2017 - Refund of IGST on exports - Shipping bill as refund application under Rule 96 - Rate of interest not exceeding six per cent

Interest on delayed refunds - Statutory interest under Section-56 of the CGST Act, 2017 - Rate of interest not exceeding six per cent - Entitlement to statutory interest under Section-56 for delayed refund of IGST charged on exports and the applicable rate. - HELD THAT: - The Court interpreted Section-56 of the CGST Act, 2017 and applied it to the facts that the IGST on exports (reflected in the shipping bills which, under Rule 96, operate as refund applications) was not refunded within the statutory sixty-day period. The plain reading of Section-56 mandates payment of interest where a refund ordered under the relevant provisions is not made within sixty days; the rate prescribed for such delayed refunds is not exceeding six per cent. Although the refund itself was eventually credited during the pendency of the writ, the delay gives rise to a statutory right to interest. The Court rejected any factual justification advanced by the revenue (such as a technical glitch) as negating the statutory entitlement to interest and directed the authorities to calculate interest in accordance with Section-56. [Paras 9, 11, 12]

The writ-applicant is entitled to interest on the delayed IGST refund at the rate of six per cent; the authorities are directed to calculate the interest in accordance with Section-56 within six weeks.

Final Conclusion: Writ disposed: refund had been credited during pendency but applicant entitled to statutory interest under Section-56 at six per cent; authorities directed to compute interest within six weeks.

Cancellation of GST registration - restoration of registration - administrative recall of an order - mistake by agent/chartered accountant (inadvertent error) - equitable relief under Article 226

Cancellation of GST registration - mistake by agent/chartered accountant (inadvertent error) - administrative recall of an order - restoration of registration - equitable relief under Article 226 - Order cancelling the writ applicants' GST registration arising from an inadvertent mistake by their Chartered Accountant is to be recalled and the original registration restored. - HELD THAT: - The Court recorded that the cancellation of the proprietary firm's GST registration occurred due to an inadvertent error by the Chartered Accountant who, while intending to cancel an HUF registration, inserted the proprietorship's registration number, resulting in cancellation of the firm's registration; notwithstanding cancellation, returns continued to be accepted. Having considered the facts and submissions, the Court held that a dealer should not be visited with the harsh consequence of cancellation where the cancellation arose from an inadvertent mistake by the agent. In exercise of jurisdiction under Article 226 and by way of equitable administrative relief, the Court directed respondent No.2 to look into the matter, recall the cancellation order and restore the original CGST registration forthwith, directing that the needful be done within eight weeks. The writ petition was disposed accordingly and direct service was permitted. [Paras 5, 6, 7]

Respondent No.2 directed to recall the cancellation order and restore the original CGST registration within eight weeks; writ disposed.

Final Conclusion: Writ petition disposed by directing the authority to recall the order cancelling the GST registration-caused by an inadvertent mistake by the Chartered Accountant-and to restore the original registration within eight weeks; direct service permitted.

Principles of natural justice - cancellation of GST registration for non-filing of returns - consideration of material not communicated to the affected party - non speaking administrative order - revival of GST registration subject to compliance with tax, interest and penalty

Principles of natural justice - consideration of material not communicated to the affected party - Appellate authority's dismissal of the appeal by relying on a spot visit report which was not put to the appellant and without giving an opportunity to reply violated the principles of natural justice. - HELD THAT: - The show cause notice and original cancellation proceeded on the ground of continuous non filing of returns for six months. The appellate authority, however, treated a negative spot visit report prepared by the lower authority-containing observations not reflected in the show cause notice-as a basis to dismiss the appeal. The firm was not given notice that the appellate authority would rely on that report nor an opportunity to meet those new allegations. Such procedure amounted to deciding the matter on material behind the party's back and therefore offended the rules of fair hearing. The Court concluded that this procedural infirmity was sufficient to set aside the impugned orders. [Paras 5, 6]

The appellate order was quashed for violating natural justice by considering uncommunicated material; the procedure of deciding on the spot visit report without affording opportunity to the firm was held impermissible.

Cancellation of GST registration for non-filing of returns - non speaking administrative order - revival of GST registration subject to compliance with tax, interest and penalty - The original order of cancellation (being non speaking and founded on the show cause ground of non filing) was quashed and the GST registration was directed to be revived subject to the firm filing returns and depositing tax with interest and penalty within the time limit specified. - HELD THAT: - The cancellation order, being non speaking and premised on the specific statutory ground of non filing of returns, could not be sustained in the circumstances where the appellate process also suffered from procedural unfairness. The Court set aside the original cancellation order and directed revival of registration; it permitted the assessee to file returns and to pay tax with penalty and interest in accordance with law. The Court further directed that if the dues were not deposited within two weeks, the authority would be at liberty to pass a fresh cancellation order in accordance with law. The Court also left open the right of the authority to undertake lawful spot inspections in future. [Paras 7]

The cancellation order was quashed; GST registration stands revived and the writ applicant is permitted to file returns and pay tax with interest and penalty; non compliance within two weeks permits fresh cancellation.

Final Conclusion: Writ petition allowed: both the appellate order dated 17.11.2021 and the original cancellation dated 21.07.2020 are quashed; GST registration is revived and the petitioner is permitted to file returns and deposit tax with interest and penalty within the time directed, failing which the authorities may proceed in accordance with law.

Maintainability of writ under Article 226 - Exhaustion of statutory appellate remedy - Principles of natural justice - Violation of statutory provisions - Want of jurisdiction - Excessive claim of transitional input tax credit

Maintainability of writ under Article 226 - Exhaustion of statutory appellate remedy - Principles of natural justice - Violation of statutory provisions - Want of jurisdiction - Whether the writ petition under Article 226 is maintainable despite the existence of an alternative appeal remedy and whether any of the recognised exceptions to exhaustion of remedy apply. - HELD THAT: - The Court examined whether any of the three recognised exceptions to the requirement of exhausting statutory appellate remedies-(i) violation of principles of natural justice, (ii) violation of statutory provisions, or (iii) want of jurisdiction-were present. The record showed that a show cause notice had been issued and an opportunity of personal hearing was afforded to the petitioner, which the petitioner did not utilize. There was therefore no established breach of the principles of natural justice, no finding of statutory violation by the Court, nor any asserted jurisdictional defect that would oust the appellate remedy. Consequently, the availability of an effective statutory appeal precluded the exercise of extraordinary writ jurisdiction in these circumstances, and the petitioner was directed to pursue the appellate remedy for a challenge on merits to the assessment/order concerning the claimed transitional input tax credit.

Writ petition dismissed for non-availability of the exceptional grounds to bypass the statutory appeal; petitioner may agitate the grievance before the appellate authority.

Final Conclusion: The writ petition is dismissed for want of exceptional circumstances to invoke Article 226 where an alternative appellate remedy exists; the petitioner remains free to pursue statutory appeal against the impugned order for adjudication on merits.

Refund of accumulated Input Tax Credit under the erstwhile TNVAT regime - transition of pending refund claims under Section 142(3) of the Central Goods and Services Tax Act, 2017 - requirement of filing Form W within prescribed period under the erstwhile law - disposal of pending applications in accordance with existing law - abeyance of recovery proceedings pending adjudication of refund claim

Refund of accumulated Input Tax Credit under the erstwhile TNVAT regime - disposal of pending applications in accordance with existing law - transition of pending refund claims under Section 142(3) of the Central Goods and Services Tax Act, 2017 - requirement of filing Form W within prescribed period under the erstwhile law - abeyance of recovery proceedings pending adjudication of refund claim - Whether the refund claim made under the erstwhile TNVAT regime, which was filed and acknowledged before the appointed day, must be adjudicated under the existing law in terms of the transitional provision and whether the impugned recovery order could be sustained without such adjudication - HELD THAT: - The petitioner filed a reply cum request dated 23.05.2016 with supporting documents (including Form W and other papers) and sent a reminder on 30.12.2016; the respondent acknowledged receipt but did not decide the refund claim before the appointed day when GST commenced on 01.07.2017. Section 142(3) permits claims for refund of amounts paid under the existing law that are filed before, on or after the appointed day to be disposed of in accordance with the existing law (ie., the TNVAT Act). Given that the petitioner's application was pending and supported by documents, the Revenue could and ought to have adjudicated the claim under the erstwhile law in accordance with Section 142(3). The respondent's course of passing the impugned order demanding reversal of alleged inadmissible input tax credit, penalty and interest without first deciding the pending refund claim under the TNVAT regime is legally unsustainable. Accordingly, the Court directed that the petitioner's application dated 23.05.2016 (with reminder dated 30.12.2016) be considered on merits under the existing law read with Section 142(3), with opportunity for personal hearing and verification of documents including Form W; until that adjudication, the impugned order is to be kept in abeyance. The ultimate effect of the impugned order is to be determined after disposal of the refund claim as above.

The respondent is directed to consider and decide the petitioner's refund application filed on 23.05.2016 (and reminder dated 30.12.2016) under the erstwhile TNVAT law read with Section 142(3) of the GST Act, after giving personal hearing and verifying documents, and the impugned order is to remain in abeyance until such decision; further action pursuant to the impugned order shall depend on that outcome.

Final Conclusion: Writ petition disposed with directions to the respondent to adjudicate the pending refund claim filed before the appointed day under the erstwhile TNVAT law read with Section 142(3) of the GST Act, after personal hearing and document verification; the impugned recovery order is kept in abeyance pending that adjudication.

Payment of tax in instalments - self-assessed returns - power of Commissioner to extend time for payment under section 80 - coercive steps

Payment of tax in instalments - self-assessed returns - power of Commissioner to extend time for payment under section 80 - Whether petitioner could be permitted to pay the tax due for February 2021 and March 2021 in 20 equated monthly instalments - HELD THAT: - Petitioner admitted liability for the tax of February 2021 and March 2021 and relied on financial difficulty caused by the Covid-19 pandemic to seek payment in instalments, citing earlier orders of this Court. Respondents relied on the limitation in the statutory scheme that the Commissioner's power to extend time for payment under the Act does not extend to amounts due under self-assessed returns. The Court observed that, although the broader legal question whether instalments can be permitted contrary to the statutory provision need not be decided in this petition, the petitioner had already enjoyed almost twelve months' benefit by not paying the tax and respondents were willing to accept the entire tax if paid immediately. In these circumstances a further concession of instalments was not warranted. The determinative reasoning combined the concession of the petitioner's liability, the statutory restriction on the Commissioner's power in respect of self-assessed returns, and the fact that the petitioner had already had prolonged non-payment, leading to a direction for immediate clearance rather than instalments. [Paras 6, 8, 9]

Petitioner's request for payment in 20 instalments is refused; petitioner must pay the tax due from February 2021 onwards within one month of receipt of the judgment and respondents shall accept the tax if so paid and permit continuation of registration.

Coercive steps - payment of tax in instalments - Whether respondents should be restrained from initiating coercive steps if petitioner is permitted to submit subsequent returns while tax remains unpaid - HELD THAT: - Petitioner sought a direction permitting submission of subsequent returns without initiation of coercive action. The Court did not accede to a stay or protection allowing continued non-payment: having refused instalments and directed immediate payment within one month, the Court left no basis to restrain coercive action beyond the limited period given for payment. The order requires clearance of outstanding tax promptly; once the tax is paid within the directed time respondents must accept it and the petitioner may continue registration. No broader protection from coercive measures was granted. [Paras 9]

No direction restraining coercive steps was granted beyond the limited period allowed for immediate payment; respondents shall accept payment if made within the time directed and permit continuation of registration.

Final Conclusion: Writ petition disposed of: petitioner's request for payment in instalments is refused; petitioner must pay the tax due from February 2021 onwards within one month of receipt of the judgment, failing which no instalment concession is available; if paid within the directed time respondents shall accept the payment and permit continuation of registration.

Exemption under Entry No.66(b)(iv) of Notification No.12/2017-Central Tax (Rate) (services relating to conduct of examination) - interpretation of the phrase "relating to" in exemption entries - definition of "educational institution" for exemption purposes - examination as an essential component of "education" - liberal and literal construction of exemption notifications

Exemption under Entry No.66(b)(iv) of Notification No.12/2017-Central Tax (Rate) (services relating to conduct of examination) - interpretation of the phrase "relating to" in exemption entries - definition of "educational institution" for exemption purposes - examination as an essential component of "education" - Supply of ASSET services by the writ-applicant to schools falls within the exemption under Entry No.66(b)(iv) of Notification No.12/2017 and is not subject to GST. - HELD THAT: - The court examined whether the services supplied by the petitioner (setting question papers, conducting assessment, evaluating answers and preparing results) qualify as services "in relation to" the conduct of examination by an "educational institution" covered by the notification. The notification defines "educational institution" to include institutions providing education up to higher secondary. The court accepted the proposition that the concept of "education" is wide and that "examination" is an essential component of education. It noted the Gujarat Authority for Advance Ruling's factual findings that schools use ASSET as part of their internal evaluation, that contracts make ASSET mandatory for the schools' assessment process, and that the petitioner supplies and designs the questions which schools incorporate into their examination/evaluation framework. The court observed that the term "relating to" is broad and covers services that assist an educational institution in its act of conducting examinations. Applying these principles and having regard to the factual findings recorded by the Authority for Advance Ruling, the court held that the appellate authority misdirected itself by focusing on who physically conducted the test rather than on whether the services were rendered to educational institutions in relation to their conduct of examinations. The court concluded that the services fall within the exemption and that exemption provisions should be given a liberal yet literal construction consistent with their object. [Paras 21, 25, 26, 27, 28]

The Gujarat Appellate Authority for Advance Ruling's order is quashed and set aside; the Gujarat Authority for Advance Ruling's order holding ASSET services exempt is affirmed.

Final Conclusion: Writ allowed. The appellate authority's reversal was held unsustainable; the Advance Ruling finding that ASSET services supplied to schools are exempt under the cited notification is affirmed and the appellate order dated 07.09.2021 is quashed.

Cancellation of registration - revocation of cancellation of registration - principle of natural justice - right to supply of documents relied upon - opportunity of hearing - reasoned and speaking order

Revocation of cancellation of registration - principle of natural justice - right to supply of documents relied upon - opportunity of hearing - reasoned and speaking order - Impugned order rejecting the petitioners' application for revocation of cancellation of GST registration was set aside for failure to afford principles of natural justice by not furnishing documents relied upon and not giving an opportunity of hearing. - HELD THAT: - The Court found that the order rejecting the application for revocation of cancellation referred to documents or records relied upon by the respondent which were never furnished to the petitioner, preventing the petitioner from contradicting those materials. The State's counsel did not deny non-furnishing. In view of this breach of the principles of natural justice, the Court declined to go into the merits and directed that the impugned order be set aside. The matter is remitted to the Deputy Commissioner to reconsider and dispose of the application afresh in accordance with law. The authority is required to provide the petitioner with the documents to be relied on, afford an opportunity of hearing to the petitioner or its authorised representative, and pass a reasoned and speaking order within four weeks from communication of this order.

Impugned order dated 4th September, 2020 set aside; matter remitted for fresh consideration after supplying relied documents and hearing, and for passing a reasoned speaking order within four weeks.

Final Conclusion: Writ petition disposed by setting aside the order rejecting revocation of cancellation of registration and remitting the application for fresh adjudication in accordance with law after furnishing relied documents, affording hearing and passing a reasoned order within four weeks; Court did not decide the merits.

Business Support Services - supporting services in transport - Goods Transport Agency - courier agency - consignment note - classification of services - SAC 998599 - GST rate 18%

Business Support Services - supporting services in transport - classification of services - Whether the services supplied by GSRTC in respect of transportation of parcels for Ashapura are classifiable as Business Support Services or as supporting services for road transport. - HELD THAT: - The Authority found on the facts and the agreement that GSRTC provides services to agencies engaged in parcel transportation by giving space on buses and parcel office facilities and therefore supports the business of the service recipient (Ashapura). The activity of GSRTC was characterized as infrastructural support falling within Business Support Services rather than as a supporting service for road transport. The Agreement and the nature of GSRTC's role - providing space and logistical support while Ashapura remains responsible for door-to-door delivery and for the parcels - underpin this classification. The Authority therefore treated GSRTC's supply as Business Support Service. [Paras 36, 37, 41, 43]

GSRTC's supplies in the presented arrangement are classifiable as Business Support Services.

SAC 998599 - GST rate 18% - What is the SAC code and applicable GST rate for the services supplied by GSRTC as classified above. - HELD THAT: - Having classified the supply as Other Support Services n.e.c. within Business Support Services, the Authority assigned the six-digit SAC corresponding to that category and applied the standard rate applicable to such services. The ruling identifies the precise SAC and the GST rate to be charged on GSRTC's supply in the facts before the Authority. [Paras 43]

SAC is 998599 (Other Support Services n.e.c.); applicable GST rate is 18%.

Goods Transport Agency - courier agency - consignment note - Whether GSRTC is a Goods Transport Agency or a courier agency for the parcels transported for Ashapura and whether reverse charge provisions for GTA would apply. - HELD THAT: - The Authority recorded that GSRTC is not engaged in door-to-door transportation and that Ashapura performs the courier function; accordingly GSRTC is not a courier agency. Although GSRTC transports goods by road and issues parcel receipts, the Authority found that these receipts do not equate to consignment notes and GSRTC's contractual terms absolving it of liability for parcels are inconsistent with the obligations of a Goods Transport Agency. For these reasons and having regard to the nature of consideration (transport charges and rent for parcel office space), the Authority concluded GSRTC is neither a GTA nor a courier agency, and hence provisions relevant to GTAs (including reverse charge applicability as contended) are not attracted in this scenario. [Paras 37, 38, 39, 40, 43]

GSRTC is neither a Goods Transport Agency nor a courier agency; reverse charge provisions applicable to GTA do not apply to GSRTC's supplies in this arrangement.

Final Conclusion: For the arrangement before the Authority GSRTC's activities of transporting parcels for Ashapura and providing parcel office/space constitute Business Support Services (SAC 998599) taxable at 18%; GSRTC is not a Goods Transport Agency nor a courier agency, and provisions applicable to GTA (including reverse charge) are not attracted.

Reopening of assessment - reason to believe - tangible material - income escaping assessment - power to reassess under Section 147/148 - change of opinion - Income Declaration Scheme (IDS) immunity limited to declarant

Reason to believe - tangible material - income escaping assessment - power to reassess under Section 147/148 - change of opinion - Validity of the Assessing Officer's re-opening of the assessment for AY 2010-11 on the basis of reasons recorded and material seized. - HELD THAT: - The Court examined whether the AO had objective, tangible material linking the assessee to accommodation entries and unaccounted receipts such that a 'reason to believe' under Section 147/148 arose. The AO relied upon seized records from searches (including an MS Excel sheet and corroborative material from searches in related cases), correlation of that material with the assessee's returns and ROC filings, discrepancies in investor particulars and failure of the assessee to establish the creditworthiness and genuineness of share applicants. The Court reiterated the settled law that reopening must be founded on tangible material and that sufficiency of that material is ordinarily not subject to judicial re examination except to test whether the reasons have a rational connection with formation of belief; mere possibility of an explanation by the assessee does not preclude issuance of a reassessment notice. Applying these principles to the record, the Court found that the AO had objective material warranting reassessment and that the High Court erred in quashing the notice by treating the assessee's offered explanation as conclusive at the threshold stage. [Paras 23, 25, 29]

The Assessing Officer had tangible material and valid 'reasons to believe' to reopen the assessment for AY 2010-11; the High Court erred in quashing the notice.

Income Declaration Scheme (IDS) immunity limited to declarant - limited immunity - Whether a declaration and immunity under the IDS by a third party declarant (Garg Logistics) bars reassessment or affords immunity to a non declarant assessee. - HELD THAT: - The Court analysed Chapter IX of the Finance Act, 2016 and Section 192 which grants limited protection to a declarant in respect of the declarant's own declaration. The Court held that IDS confers immunity only to the declarant and only to the limited extent specified; that immunity does not automatically extend to other persons or to shield a non declarant assessee from inquiry or reassessment. The High Court's conclusion that the declarant's IDS filing precluded the AO from reopening the assessee's assessment was rejected as inconsistent with the statutory scheme and established precedents which recognise the confined ambit of such immunities. [Paras 30, 31, 32, 34]

IDS immunity is confined to the declarant and does not prevent reassessment of a non declarant; the High Court erred in treating the declarant's IDS filing as conferring immunity on the assessee.

Final Conclusion: The High Court's quashing of the reassessment notice was set aside: the AO may proceed to complete reassessment for AY 2010-11, and the appeal is allowed.

Reasoned order - personal hearing - jurisdictional objections - opportunity to make further submissions on merits - extension of time for making submissions - extension of limitation for passing order

Reasoned order - personal hearing - jurisdictional objections - Respondent to hear petitioner and decide objections to jurisdiction by passing a reasoned order. - HELD THAT: - The High Court directed respondent no.1 to grant the petitioner a personal hearing and to pass an appropriate reasoned order dealing with the objections raised contesting the respondent's jurisdiction to issue the impugned show-cause notice. The Court left all contentions on jurisdiction and merits open for determination by the respondent in that reasoned order, and recorded that the respondent was inclined to hear the petitioner forthwith. [Paras 4, 6]

Respondent no.1 must hear the petitioner and pass a speaking/reasoned order on the jurisdictional objections.

Opportunity to make further submissions on merits - extension of time for making submissions - extension of limitation for passing order - Petitioner granted a fortnight to make further submissions on merits if jurisdictional objections are rejected; limitation period extended accordingly. - HELD THAT: - The Court granted the petitioner a period of two weeks to file further submissions on the merits in the event the respondent spurns the jurisdictional objections. In view of directing the respondent to afford an opportunity to make submissions on merits, the Court held that the period of limitation to pass the requisite order on merits would be suitably extended so that the order does not become barred by any law of limitation, subject to the objections raised by the petitioner regarding expiry of limitation. [Paras 5, 8]

Fortnight granted for submissions; limitation period extended to permit passing of the merits order without being time-barred.

Communication through advocate-on-record - No separate notice required; communication of hearing time may be effected through the petitioner's advocate-on-record. - HELD THAT: - The Court made clear that no separate notice need be served on the petitioner because the order was made in the presence of his advocate-on-record, who is to communicate the time when respondent no.1 intends to hear the petitioner. [Paras 7]

No separate notice necessary; advocate-on-record to be informed of hearing time.

Final Conclusion: Writ petition disposed of by directing respondent no.1 to personally hear the petitioner and pass a reasoned order on jurisdictional objections, granting the petitioner two weeks for further submissions on merits if those objections are rejected, extending the limitation for passing the merits order, and permitting communication of the hearing time through the petitioner's advocate-on-record; costs excluded.

Substitution of statutory provisions - applicability of amended law from commencement date - Section 148A procedure to be complied before issuing notice - time limits for reassessment and effect of extension notifications - validity of delegated legislation / ultra vires notifications - validity of notice to be judged by law on date of issuance - presumption against repeal by implication

Substitution of statutory provisions - applicability of amended law from commencement date - validity of notice to be judged by law on date of issuance - Notices under Section 148 issued on or after 1st April 2021 must comply with the substituted provisions of Sections 147-151 (including newly inserted Section 148A) brought into force by the Finance Act, 2021 with effect from 1st April 2021. - HELD THAT: - The Court held that the Finance Act, 2021 substituted the earlier reassessment scheme with effect from 1st April 2021 and, in the absence of any saving clause, the earlier provisions ceased to have effect thereafter. The validity of any notice under Section 148 is to be judged by the law prevailing on the date of its issue; therefore notices issued on or after 1st April 2021 must conform to the amended statutory scheme, including the procedural requirements introduced by Section 148A. The Relaxation Act extended time-limits for actions but did not empower the Executive to postpone or revive applicability of the substituted statutory provisions; consequently the executive notifications cannot be used to avoid compliance with the statute as enacted by Parliament. Applying principles against implied repeal and having regard to the legislative intent reflected in the Finance Act and its memorandum, the Court found that the substituted provisions govern issuance of notices after 1st April 2021 and that notices issued without complying with those provisions are invalid. [Paras 34, 37, 50, 51, 52]

All impugned notices issued under Section 148 on or after 1st April 2021 are quashed for non-compliance with the amended reassessment regime; Assessing Officers may, if lawfully permissible, initiate fresh proceedings only in accordance with the Act as amended.

Section 148A procedure to be complied before issuing notice - time limits for reassessment and effect of extension notifications - validity of delegated legislation / ultra vires notifications - The explanations contained in Notification No.20 of 2021 (31st March 2021) and Notification No.38 of 2021 (27th April 2021) which sought to apply the pre-amendment provisions for issuance of Section 148 notices are ultra vires and declared invalid. - HELD THAT: - The Court found that the Relaxation Act empowered the Executive only to extend specified time-limits and did not authorize the Executive to alter or revive substantive or procedural provisions substituted by the Finance Act, 2021. The impugned notifications introduced explanations purporting to apply the unamended Sections 148, 149 and 151 as at 31st March 2021; that step exceeded the delegated power because it attempted to change the statutory basis governing issuance of reassessment notices rather than merely extend time. Even applying those explanations would not validate notices that failed to comply with Section 148A (which the explanations did not cure in substance, and which in any event is part of the amended statutory scheme). Accordingly the explanations were held to be beyond the scope of the parent Act and invalid. [Paras 40, 41, 50]

The Explanations in Notification Nos.20 and 38 of 2021 are ultra vires and set aside; the notices purporting to rely on them are liable to be quashed.

Final Conclusion: The writ petitions are allowed: the impugned explanatory provisions in Notification Nos.20/2021 and 38/2021 are declared ultra vires and all Section 148 notices issued on or after 1st April 2021 in the listed matters are quashed; Assessing Officers remain free to initiate fresh reassessment proceedings only after strictly complying with the reassessment provisions of the Income-tax Act as amended by the Finance Act, 2021.

Validity of notice under Section 148 - Reasoned belief requirement for reopening assessments - Application of mind by Assessing Officer at stage of issuing notice - Approval under Section 151 - Interim stay of reassessment proceedings

Validity of notice under Section 148 - Reasoned belief requirement for reopening assessments - Application of mind by Assessing Officer at stage of issuing notice - Interim stay of reassessment proceedings - Whether interim stay should be granted on proceedings initiated by notice under Section 148 in view of the content of the reasons recorded and earlier assessment having been completed under Section 143(3). - HELD THAT: - The Court observed that the assessment under Section 143(3) for the relevant year had accepted the return (recording total loss as per the return) and noted that the reasons recorded for issuance of notice under Section 148 did not specifically mention the name of the alleged paper shell concern. While the assessing officer subsequently identified the paper shell company, the reasons as recorded at the time of initiating reassessment proceedings prima facie did not demonstrate that the officer had applied his mind to the return or assessment order. Having regard to these features and the attendant facts and circumstances, the Court was inclined to afford interim protection to the petitioner and to stay the reassessment proceedings initiated by the Section 148 notice pending further hearing of the petition.

Interim stay granted; proceedings pursuant to the notice under Section 148 shall remain stayed until the next date of hearing.

Final Conclusion: I.A. No.1/2022 allowed; reassessment proceedings initiated by the notice under Section 148 for Assessment Year 2014-15 are stayed pendente lite until the next listing (week commencing 25.4.2022).

Reasoned disposal of objections to reasons recorded - reopening of assessment under Section 148 - applicability of Section 153C to reassessment proceedings - remand for fresh consideration in accordance with judicial guidelines - requirement to furnish documents referred to in reasons

Reasoned disposal of objections to reasons recorded - requirement to furnish documents referred to in reasons - Impugned order rejecting objections did not contain sufficient reasons and was therefore quashed. - HELD THAT: - The Court found that the order of respondent No. 3 merely quoted the statutory provision and did not address the specific objections raised by the petitioner with cogent reasons. Relying on the principles formulated in Tata Capital Financial Services Limited (as cited by this Court) and authorities referred therein, the Court emphasised that where reasons refer to other documents or communications, those documents should be furnished and each objection must be dealt with and answered by recorded reasons. The impugned order failed to comply with these requirements and was held to be in violation of the said principles; consequently it could not stand. [Paras 11, 12]

Impugned order dated 01.03.2022 quashed for lack of reasoned disposal of the objections; respondent No. 3 directed to decide objections afresh with cogent reasons and by furnishing any documents referred to in the reasons.

Reopening of assessment under Section 148 - applicability of Section 153C to reassessment proceedings - remand for fresh consideration in accordance with judicial guidelines - Proceedings restored and remanded to respondent No. 3 to decide the maintainability/tenability (including the contention as to applicability of Section 153C) afresh and in accordance with law. - HELD THAT: - The petitioner had contended that the matter fell under Section 153C and not Section 147/148. The Court observed that the impugned order did not meaningfully engage with the petitioner's specific objections on tenability, including the contention regarding Section 153C, and therefore remanded the matter. The respondent No. 3 is directed to reconsider the objections afresh without being influenced by the vacated order and to apply the principles requiring reasoned disposal; the Court prescribed a timeline for disposal and for communication of the result to the petitioner, and protected the petitioner from any adverse order for a limited period following communication. [Paras 13]

Proceedings restored before respondent No. 3 for fresh decision on the objections (including the question of applicability of Section 153C), to be decided in accordance with law and the guidelines referred to by the Court within the time prescribed.

Final Conclusion: The order dated 01.03.2022 rejecting the petitioner's objections is quashed for want of reasoned consideration; the matter is remitted to respondent No. 3 for fresh decision on the objections (including the contention as to Section 153C) in accordance with the principles cited by this Court, subject to the timelines and protective directions stated in the order.

Search and seizure under Section 132 of the Income Tax Act - reasons to believe - sufficiency of material for exercise of power - distinction between reasons to suspect and reasons to believe - exercise of power under Section 132(c) - judicial review under Article 226 of the Constitution

Search and seizure under Section 132 of the Income Tax Act - reasons to believe - sufficiency of material for exercise of power - distinction between reasons to suspect and reasons to believe - judicial review under Article 226 of the Constitution - Validity of the search and warrant of authorisation under Section 132: whether the material before the Authority constituted 'reasons to believe' permitting exercise of power under Section 132. - HELD THAT: - The Court examined the confidential satisfaction note and ancillary material produced by the Revenue. The note identified the petitioner, specified premises, and recorded results of field enquiries and telephone enquiries alleging receipt of unaccounted cash, cash payments in land transactions, discrepancies between declared profits and project profits, non-filing for Assessment Year 2019-20, and rental/investment facts not reflected in books. The note set out analysis with specific transaction details and figures and concluded that the petitioner was likely in possession of money, bullion, jewellery or other valuables representing undisclosed income. Although the document used the phrase 'reason to suspect' in parts, the Court held that the detailed references to particular transactions and tabulated analysis demonstrated material sufficient to constitute 'reasons to believe' for invoking Section 132. Applying judicial review standards under Article 226, the Court refrained from re-assessing the sufficiency of the material beyond ensuring that a rational nexus existed between the material and the conclusion recorded by the Authority.

The challenge to the legality and jurisdiction of the search and warrant under Section 132 is rejected; the material produced sufficed to constitute 'reasons to believe' and no interference is warranted.

Exercise of power under Section 132(c) - alternative remedy of reassessment under Section 148 - malice, arbitrariness and capriciousness - Whether invocation of Section 132(c) was inappropriate when reassessment under Section 148 was available and whether the action was malafide, arbitrary or capricious. - HELD THAT: - The Court acknowledged that reassessment is a remedy available to the Department, but found that in light of the information and analysis contained in the satisfaction note-particularly particulars of cash collections, unaccounted investments, and discrepancies in declared profits-the grounds for resorting to Section 132(c) were made out. The Court did not find any material to infer malice, arbitrariness or capriciousness in the decision to invoke search powers. The Court clarified that it was not expressing any opinion on the quality of the material beyond the limited scope of assessing whether grounds existed to exercise Section 132 powers and left other contentions open for appropriate proceedings.

Exercise of power under Section 132(c) was justified on the material produced; the action is not vitiated by malice, arbitrariness or capriciousness, and thus is not interfered with.

Final Conclusion: Writ petition dismissed insofar as it challenges the initiation of search and seizure under Section 132 and the authorisation therefor; the Court declines to interfere with the impugned action while leaving the petitioner free to pursue other remedies against the impugned orders and preserving other contentions for consideration in appropriate proceedings.

Reopening of assessment - Substitution of reassessment provisions (Finance Act, 2021) - Non-survival of repealed provisions and effect of substitution - Time limits for issuance of notice under Section 149 and proviso to Section 149(1) - Procedure under Section 148A prior to issuance of notice - Validity of CBDT notifications/explanations issued under the Relaxation Act, 2020 - Scope of delegated legislation and vires of subordinate legislation

Reopening of assessment - Substitution of reassessment provisions (Finance Act, 2021) - Time limits for issuance of notice under Section 149 and proviso to Section 149(1) - Procedure under Section 148A prior to issuance of notice - Notices under Section 148 issued after 01.04.2021 for assessment years prior to that date must comply with the reassessment scheme introduced by the Finance Act, 2021; notices issued without following Section 148A are invalid. - HELD THAT: - The Court accepted the Coordinate Bench's reasoning that upon substitution the earlier reassessment provisions stood repealed and did not survive. The Finance Act, 2021 introduced a materially different scheme for reassessment, including the enquiry and pre-notice procedure under Section 148A and modified time-limits in Section 149. There is no indication in the statutory scheme that the substituted provisions were intended to be confined to future periods; instead, the first proviso to Section 149(1) shows the new scheme governs notices issued after 01.04.2021 while preventing revival of notices already time-barred under the pre-amendment law. Consequently, notices issued after 01.04.2021 which did not follow the Section 148A procedure are contrary to the applicable statutory scheme and are invalid. [Paras 36, 37, 42]

Notices issued after 01.04.2021 without compliance with the reassessment scheme introduced by the Finance Act, 2021 (including Section 148A) are invalid and quashed.

Validity of CBDT notifications/explanations issued under the Relaxation Act, 2020 - Scope of delegated legislation and vires of subordinate legislation - The explanatory notifications issued by the CBDT on 31.03.2021 and 27.04.2021 purporting to preserve the application of pre-amendment reassessment provisions for notices issued after 01.04.2021 exceeded the delegated power under the Relaxation Act, 2020 and are invalid. - HELD THAT: - The Court held that the Relaxation Act, 2020 empowered the Central Government only to extend specified time limits by notification; it did not authorise the Executive to alter or clarify the substantive effect of statutory amendments to the Income Tax Act. By issuing explanations that sought to apply the pre-amendment Section 148/Section 149 regime to notices issued after 01.04.2021, the CBDT traversed beyond the delegation in subsection (1) of Section 3 of the Relaxation Act, 2020. Subordinate legislation cannot, under the guise of clarification, change the clear statutory scheme. Applying principles governing delegated legislation and its vires, the Court declared those explanations unconstitutional and invalid. [Paras 40, 41]

The CBDT explanations in the notifications dated 31.03.2021 and 27.04.2021 are ultra vires the delegated power and are invalid.

Final Conclusion: The writ petitions are allowed; the impugned notices issued after 01.04.2021 are quashed as being issued without complying with the reassessment scheme (including Section 148A) introduced by the Finance Act, 2021, and the CBDT explanations in the challenged notifications are declared invalid for exceeding delegated authority.

Reopening / reassessment after substitution of reassessment scheme (Finance Act, 2021) - applicability of newly inserted procedure under Section 148A for notices issued after 01.04.2021 - temporal application of amended time-limits for issuance of notice and first proviso to substituted Section 149(1) - vires of CBDT notifications dated 31.03.2021 and 27.04.2021 issued under the Relaxation Act, 2020 - scope and limits of delegated legislation and presumption of constitutionality

Applicability of newly inserted procedure under Section 148A for notices issued after 01.04.2021 - reopening / reassessment after substitution of reassessment scheme (Finance Act, 2021) - temporal application of amended time-limits for issuance of notice and first proviso to substituted Section 149(1) - Notices of reassessment issued after 01.04.2021 for assessment periods prior to that date which do not follow the procedure introduced by the Finance Act, 2021 (including Section 148A) are invalid. - HELD THAT: - The court held that the Finance Act, 2021 introduced a new scheme for reopening assessments which includes an enquiry-process under Section 148A and altered time-limits under substituted Section 149. There is no indication in the statutory scheme that the prior procedure for reopening should continue to apply to notices issued after 01.04.2021 even if the assessments relate to periods before that date. The first proviso to substituted Section 149(1) demonstrates that notices issued after 01.04.2021 must conform to the substituted provisions while preventing revival of notices that were time-barred under the earlier law. Consequently, notices issued after 01.04.2021 without following the Section 148A procedure and the substituted scheme are legally unsustainable and were quashed.

All impugned reassessment notices issued after 01.04.2021 for periods prior to that date, which were issued without complying with the procedure under the Finance Act, 2021 (including Section 148A), are quashed.

Vires of CBDT notifications dated 31.03.2021 and 27.04.2021 issued under the Relaxation Act, 2020 - scope and limits of delegated legislation and presumption of constitutionality - The explanations inserted by the CBDT in the notifications dated 31.03.2021 and 27.04.2021 purporting to defer application of the substituted reassessment provisions are beyond the delegated power conferred by the Relaxation Act, 2020 and are invalid. - HELD THAT: - The Relaxation Act, 2020 empowered the Central Government only to extend time-limits for compliances by notification. The CBDT, by adding an explanation purportedly preserving application of the pre-amendment Section 148 for a further period, exceeded the delegation and effectively sought to alter the statutory scheme. While subordinate legislation enjoys a presumption of constitutionality, it must remain within the parent Act; an explanation cannot be used to change the legal effect of the statutory amendment. Accordingly, the notifications' explanatory provisions which attempted to defer or preserve the earlier reassessment regime were held to be ultra vires and declared invalid.

The explanatory provisions in the CBDT notifications of 31.03.2021 and 27.04.2021 are unconstitutional and invalid; they do not save the reassessment notices issued after 01.04.2021.

Final Conclusion: The writ petitions are allowed; all impugned notices of reassessment issued after 01.04.2021 for assessment periods prior to that date which did not follow the reassessment procedure introduced by the Finance Act, 2021 (including Section 148A) are quashed, and the explanatory provisions in the CBDT notifications of 31.03.2021 and 27.04.2021 are declared invalid.

Disallowance of expenditure attributable to exempt income under Section 14A and Rule 8D - Attribution of interest expense against interest free own funds - Pro rata disallowance of management and administrative expenses - Ad hoc disallowance for lack of log book and personal expenditure

Disallowance of expenditure attributable to exempt income under Section 14A and Rule 8D - Attribution of interest expense against interest free own funds - Whether disallowance of interest expenditure under section 14A read with Rule 8D is sustainable - HELD THAT: - The Tribunal found that the Assessing Officer computed the disallowance under Rule 8D(2) but the assessee had sufficient own (interest free) funds as per its balance sheet and partners' capital account to explain the investments in exempt income yielding assets. Applying the principle that where owned funds suffice to finance exempt investments no part of interest need be disallowed, the Tribunal held that the disallowance could not be sustained to the extent of interest attributable to such investments. The Tribunal relied on the ratio in Pr. CIT vs. Syntex Industries Ltd., and noted the Revenue's SLP was dismissed, and accordingly vacated the disallowance of interest expenditure to the extent indicated. The adjudication was confined to interest disallowance as the ground of appeal challenged only that component. [Paras 6]

Disallowance of interest expenditure under section 14A read with Rule 8D partly vacated; portion of disallowance attributable to interest held unsustainable.

Pro rata disallowance of management and administrative expenses - Disallowance of expenditure attributable to exempt income under Section 14A and Rule 8D - Whether the Assessing Officer could separately disallow a pro rata portion of management and development expenses in addition to Rule 8D disallowance - HELD THAT: - The Tribunal rejected the AO's approach of first computing a disallowance under Section 14A/Rule 8D and then separately making a further pro rata disallowance out of management and development expenses. The Tribunal found the two disallowances amounted to a double adjustment without coherent basis and could not be sustained. Consequently the separate pro rata disallowance of management and development expenses was set aside. [Paras 7]

Pro rata disallowance of management and development expenses set aside; ground allowed.

Ad hoc disallowance for lack of log book and personal expenditure - Whether the ad hoc disallowance of telephone and travelling expenses is justified - HELD THAT: - The AO made an ad hoc disallowance prompted by absence of log books, which raises doubt as to business genuineness of the expenditure. The Tribunal noted that personal telephone expenses of partners were separately debited to their capital accounts and ought to have been considered by the AO. While personal element could not be ruled out, on the facts the Tribunal fairly estimated the personal/non business component at a lower sum and reduced the ad hoc disallowance accordingly. [Paras 8]

Ad hoc disallowance partly reduced; reduced estimate of personal element allowed in favour of assessee.

Ad hoc disallowance for lack of log book and personal expenditure - General ground of appeal not pressed - HELD THAT: - The broad/general ground of appeal was not pursued by the assessee and the Tribunal recorded that it was not pressed. [Paras 9]

General ground dismissed as not pressed.

Final Conclusion: The appeal is partly allowed: the interest disallowance under Section 14A/Rule 8D is vacated to the extent indicated because sufficient own funds financed exempt investments; the separate pro rata disallowance of management and development expenses is set aside; the ad hoc telephone and travelling disallowance is reduced on an estimated personal element; the general ground was not pressed.

Admission of additional evidence under Rule 46A of the Income Tax Rules - remand for fresh adjudication to the Assessing Officer - quashing of an assessment completed under section 144 - condonation of delay in filing appeal - principles of natural justice in appellate evidence procedure

Condonation of delay in filing appeal - Delay of 30 days in filing the appeal to the Tribunal is condoned. - HELD THAT: - The Tribunal considered the assessee's application explaining the cause of delay and the Revenue raised no objection. Having heard the parties and examined the materials, the Bench found the explanation acceptable and exercised its discretion to condone the 30-day delay in filing the appeal. [Paras 4]

Delay of 30 days in filing the appeal is condoned.

Admission of additional evidence under Rule 46A of the Income Tax Rules - principles of natural justice in appellate evidence procedure - The CIT(A) erred in refusing to consider the additional evidence; the additional evidence is admitted and the matter remanded for verification. - HELD THAT: - The Tribunal examined the appellate authority's refusal to admit documentary evidence on technical grounds. It held that Rule 46A governs admission of additional evidence and embodies principles of natural justice; appellate authorities must not act whimsically and must consider whether exceptional circumstances under clauses (a)-(d) of Rule 46A(1) are made out. Finding that the additional documents were relevant to proper adjudication and should be examined by the fact finder, the Tribunal admitted the evidence and set aside the impugned order to enable the Assessing Officer to verify and decide the claims after affording the assessee a reasonable opportunity. The Tribunal applied authorities to the effect that admission is warranted where it promotes just adjudication. [Paras 14]

Additional evidence furnished by the assessee is admitted; the matter is remanded to the Assessing Officer for fresh examination and adjudication after allowing opportunity to the assessee.

Quashing of an assessment completed under section 144 - remand for fresh adjudication to the Assessing Officer - The ex parte assessment order passed under section 144 is quashed and set aside and the appeal is remanded to the Assessing Officer for fresh adjudication. - HELD THAT: - Because the additional evidence is admitted and requires verification, and since the impugned assessment was completed under section 144 without the benefit of those materials being considered, the Tribunal concluded that the appropriate course is to quash the impugned order and remit the matter to the Assessing Officer. The AO is directed to examine the additional documents, verify the claims (including bank deposits and their sources), and decide in accordance with law after providing the assessee a reasonable opportunity to be heard. [Paras 14]

Impugned assessment passed under section 144 is quashed and set aside; appeal remanded to the Assessing Officer for adjudication consistent with admitted additional evidence.

Final Conclusion: The Tribunal condoned the 30 day delay in filing the appeal, admitted the additional evidence under Rule 46A as relevant to proper adjudication, quashed the ex parte assessment passed under section 144, and remanded the matter to the Assessing Officer for verification and fresh decision after affording the assessee a reasonable opportunity; appeal allowed for statistical purposes.

Disallowance under section 14A read with Rule 8D - requirement of exempt income for section 14A disallowance - deduction under section 43B - treatment of employees' contribution to PF and ESIC - applicability of Finance Act, 2021 explanations to Sections 43B and 36(1)(va)

Disallowance under section 14A read with Rule 8D - requirement of exempt income for section 14A disallowance - Whether the disallowance of expenses measured at Rs. 13,29,277/- under section 14A read with Rule 8D was sustainable where the assessee had made investments but did not earn any exempt income in the year. - HELD THAT: - The Tribunal accepted the assessee's contention that no exempt dividend or other exempt income was earned in the relevant year; accordingly, no part of expenditure could be disallowed under section 14A. The Tribunal relied on precedents supporting the proposition that section 14A disallowance is inapplicable in absence of exempt income and therefore directed the Assessing Officer to vacate the disallowance computed under section 14A read with Rule 8D. This conclusion follows from the factual finding that exempt income was not received during the year and the cited judicial authorities endorsing that position. [Paras 7, 8]

Disallowance of Rs. 13,29,277/- under section 14A read with Rule 8D set aside and deleted.

Deduction under section 43B - treatment of employees' contribution to PF and ESIC - applicability of Finance Act, 2021 explanations to Sections 43B and 36(1)(va) - Whether the employees' share of PF and ESIC contribution of Rs. 2,88,976/- paid after statutory due-date but before the due date of filing the return is allowable under section 43B for A.Y. 2011-12, and whether the Finance Act, 2021 explanations apply retrospectively. - HELD THAT: - The Tribunal held that employees' contributions to PF and ESIC fall within the scope of section 43B and are allowable if deposited before the due date for filing the return of income. The Tribunal relied on several High Court and Tribunal decisions which treated employer's and employee's contributions alike for purposes of section 43B. The Tribunal further held that the clarificatory explanations introduced by the Finance Act, 2021 (Explanation 5 to section 43B and Explanation 2 to section 36(1)(va)) operate prospectively w.e.f. 01.04.2021 (A.Y. 2021-22) and therefore do not affect the assessment year 2011-12. Applying these principles to the facts, since the employees' contributions were deposited before the return filing due date, the disallowance could not be sustained. [Paras 9, 10, 11]

Disallowance of Rs. 2,88,976/- as employees' PF/ESIC contribution vacated and allowed as deduction under section 43B for A.Y. 2011-12; Finance Act, 2021 explanations held prospective from 01.04.2021 and not applicable to the year under consideration.

Final Conclusion: The assessee's appeal is allowed: the section 14A disallowance of Rs. 13,29,277/- is deleted for lack of exempt income in the year, and the disallowance of employees' PF/ESIC contribution of Rs. 2,88,976/- is set aside as allowable under section 43B; amendments by Finance Act, 2021 are prospective from A.Y. 2021-22 and do not apply to A.Y. 2011-12.

Penalty under Sec. 271(1)(c) of the Income tax Act - requirement to specify the default in the show cause notice under Sec. 274(1) - distinction between 'concealment of income' and 'furnishing inaccurate particulars of income' - non application of mind in issuance of show cause notice - quashing of penalty for want of jurisdiction

Penalty under Sec. 271(1)(c) of the Income tax Act - requirement to specify the default in the show cause notice under Sec. 274(1) - distinction between 'concealment of income' and 'furnishing inaccurate particulars of income' - non application of mind in issuance of show cause notice - quashing of penalty for want of jurisdiction - Show cause notice did not specify which limb of Sec.271(1)(c) was invoked and, consequently, the penalty under Sec.271(1)(c) was quashed for want of jurisdiction. - HELD THAT: - The Assessing Officer's show cause notice failed to indicate whether penalty proceedings were initiated for 'concealment of particulars of income' or for 'furnishing inaccurate particulars of income'. The two defaults under Sec.271(1)(c) are distinct and the assessee is entitled, as a matter of statutory right and principles of natural justice under Sec.274(1), to be clearly informed of the specific charge against it. The omission in the notice demonstrates non application of mind by the AO and deprived the assessee of a fair opportunity to meet the charge. Reliance upon the settled judicial view that failure to specify the limb renders proceedings invalid supports quashing the penalty. Because the penalty was set aside on this jurisdictional ground, the Tribunal refrained from examining the merits of the additions/disallowances on which the penalty was founded. [Paras 8, 9, 12, 13]

The penalty of Rs. 6,92,757 imposed under Sec.271(1)(c) is quashed for want of jurisdiction as the show cause notice did not specify the limb of Sec.271(1)(c) and evidenced non application of mind by the Assessing Officer; merits were not adjudicated.

Final Conclusion: Appeal allowed: penalty under Sec.271(1)(c) for AY 2010 11 quashed for want of jurisdiction due to defective show cause notice; merits of the assessment additions/disallowances left open.

Treatment of trade creditor balances under unexplained cash credit and section 68 - disallowance under section 40(a)(ia) for failure to deduct tax at source on payments to non-residents lacking permanent establishment - application of DTAA permanent establishment rule to taxation of business profits - liability to deduct tax under section 195 is contingent on chargeability of the payment to tax in India

Treatment of trade creditor balances under unexplained cash credit and section 68 - acceptance of corresponding purchases and bank payments as evidence of genuineness - Deletion of addition made u/s 68 in respect of alleged trade creditors and related ledger items - HELD THAT: - The Tribunal accepted the Commissioner(Appeals) finding that the aggregate amount added by the AO comprised only part genuine trade creditors and the remainder represented provisions for ascertained liabilities, expenses payable and employee reimbursements. Although confirmations were obtained after completion of assessment, the assessee had furnished names and addresses of creditors, purchase registers, ledger accounts, bank statements showing payments by banking channels and DVAT returns; the AO raised no queries on the genuineness of purchases nor exercised powers to verify parties. The trading results and corresponding purchases were accepted by the AO, and there was no material before the Tribunal to take a contrary view. On these facts the addition under the unexplained cash credit head could not be sustained. [Paras 7]

Addition made u/s 68 of the Act of Rs. 1,64,02,845/- deleted; ground dismissed for Revenue.

Disallowance under section 40(a)(ia) for failure to deduct tax at source on payments to non-residents lacking permanent establishment - application of DTAA permanent establishment rule to taxation of business profits - liability to deduct tax under section 195 is contingent on chargeability of the payment to tax in India - Deletion of disallowance under section 40(a)(ia) for non-deduction of TDS on payments to Facebook Ireland Inc. - HELD THAT: - The Tribunal agreed with the Commissioner(Appeals) that Facebook Ireland certified it had no permanent establishment in India and was a tax resident of Ireland. Applying the DTAA's permanent establishment principle and the domestic chargeability test, the payments for advertising services were not chargeable to tax in India and therefore did not attract a withholding obligation under section 195; consequently, the conditions for disallowance under section 40(a)(ia) were not satisfied. The Revenue placed no material before the Tribunal to dispute the assessee's position or the documentary evidence relied upon. [Paras 8]

Disallowance for non-deduction of TDS on marketing payments to Facebook Ireland Inc. deleted; ground dismissed for Revenue.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the Commissioner(Appeals) order deleting the additions made under section 68 and the disallowance under section 40(a)(ia).

Penalty under Section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - requirement of recording satisfaction before levying penalty - validity of notice issued under Section 274 - striking off the inapplicable limb in printed penalty notice

Penalty under Section 271(1)(c) - requirement of recording satisfaction before levying penalty - concealment of particulars of income - furnishing inaccurate particulars of income - validity of notice issued under Section 274 - striking off the inapplicable limb in printed penalty notice - Whether the penalty under Section 271(1)(c) could be sustained where the Assessing Officer did not record a specific satisfaction as to which limb of Section 271(1)(c) applied and the notice under Section 274 did not indicate or strike off the inapplicable limb. - HELD THAT: - Section 271(1)(c) prescribes penalty where the authority is satisfied that a person has either concealed particulars of income or furnished inaccurate particulars of income; these are distinct limbs. The Court observed that the Assessing Officer must first record satisfaction and make a specific finding as to which limb is attracted while completing the assessment, and only thereafter proceed with penalty proceedings. The notice under Section 274 r.w.s. 271(1)(c) must indicate the specific ground on which penalty is proposed; in cases where a printed form is used, the inapplicable portion must be struck off to demonstrate application of mind. In the present case the assessment order did not record any specific finding whether it was concealment or furnishing inaccurate particulars, and the Section 274 notice left the inapplicable limb unstruck. Reliance was placed on the decision of the High Court in PCIT v. Sahara India Life Insurance Co. Ltd. which held penalty unsustainable where the notice did not specify the limb under Section 271(1)(c). Revenue produced no contrary authority overruling that decision. Applying these principles, the Court concluded that the levy of penalty was vitiated for want of specific satisfaction and for issue of an unspecified notice.

Penalty levied under Section 271(1)(c) set aside as invalid for failure to record specific satisfaction as to the applicable limb and for issuance of a non-specific notice under Section 274.

Final Conclusion: The appeal is allowed and the penalty imposed under Section 271(1)(c) is set aside for failure of the Assessing Officer to record a specific satisfaction and for initiating penalty proceedings by a notice that did not specify or strike off the inapplicable limb.

Section 263 - revisional jurisdiction of Principal Commissioner/Commissioner - Erroneous and prejudicial to the interests of revenue test - Section 142(1) - inquiry and verification by Assessing Officer - Section 10A deduction - deduction against profits of eligible undertaking - Proviso to Section 92C(4) - disallowance of deductions in respect of income enhanced by transfer pricing - Constructions favouring the assessee where two reasonable constructions exist

Section 263 - revisional jurisdiction of Principal Commissioner/Commissioner - Erroneous and prejudicial to the interests of revenue test - Section 142(1) - inquiry and verification by Assessing Officer - Constructions favouring the assessee where two reasonable constructions exist - Whether the Principal Commissioner was justified in invoking Section 263 to set aside the assessment orders on the ground that the Assessing Officer's orders were erroneous and prejudicial to the revenue. - HELD THAT: - The Tribunal found on the record that the Assessing Officer had issued notices/questionnaire under Section 142(1), the assessee had filed responses and supporting documents (including Form 56F and STPI permission) and the Assessing Officer allowed the claim after examination. The Assessing Officer took a plausible view in admitting the deduction under Section 10A after verification. As the Department did not contend that no inquiries were made or that the AO failed to verify the claim, the PCIT's conclusion that no proper inquiry was conducted was unsustainable. Applying the principle that where two reasonable constructions are possible the one favourable to the assessee should be adopted, the Tribunal held that the AO's view was not demonstrably erroneous or prejudicial to the revenue within the meaning of Section 263, and therefore the revisional order setting aside the assessments was unjustified. [Paras 7, 9, 11]

The order passed by the Principal Commissioner under Section 263 was set aside and the Assessing Officer's orders were held not to be erroneous or prejudicial to the interests of the revenue.

Proviso to Section 92C(4) - disallowance of deductions in respect of income enhanced by transfer pricing - Section 10A deduction - deduction against profits of eligible undertaking - Whether the proviso to Section 92C(4) operated to deny the assessee's deduction under Section 10A by reason of transfer pricing additions. - HELD THAT: - The Tribunal examined the proviso to Section 92C(4), which bars allowance of deductions in respect of the amount by which total income is enhanced after computation of arm's length price. The Tribunal found that the assessee did not recompute or recharacterise its Section 10A claim on account of the transfer pricing adjustment; the deduction claimed in the return (as reflected in Form 56F) remained the same and was not claimed against an enhanced assessed income. Accordingly, the factual matrix did not attract the proviso to Section 92C(4) and that proviso was not applicable to deny the Section 10A deduction in the present case. [Paras 10]

The proviso to Section 92C(4) was held inapplicable and could not be invoked to deny the assessee's Section 10A deduction.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the Principal Commissioner's order under Section 263, and held that (a) the Assessing Officer had made requisite inquiries under Section 142(1) and his allowance of the Section 10A deduction was a plausible view not vitiating the assessment under Section 263, and (b) the proviso to Section 92C(4) did not apply to deny the Section 10A deduction in the facts of this case.

Limitation under Section 18 of the Limitation Act, 1963 - acknowledgment in writing as extending limitation - relevance of documentary evidence to save limitation - appellate review of findings of fact - remand for fresh consideration

Relevance of documentary evidence to save limitation - appellate review of findings of fact - The NCLAT erred in failing to consider the letter dated 28.09.2015 and the linkage with the six cheques, and its order was accordingly vitiated. - HELD THAT: - The Tribunal below (NCLAT) reversed the NCLT without discussing the pleadings and documentary material relating to the letter dated 28.09.2015 and the six cheques which the NCLT had relied upon in finding an acknowledgment of liability. The Supreme Court observed that the cheque particulars in the letter matched the particulars of the cheques allegedly lost by the corporate debtor and that the corporate debtor's own pleadings and banker's intimation (albeit with an inadvertent date error) were material to the question whether limitation was saved. The failure of the appellate authority to examine this vital aspect, where the NCLT had recorded a specific finding of fact, vitiated the NCLAT's order. [Paras 8]

Order of NCLAT set aside for having overlooked material documentary evidence and recorded findings of fact by the NCLT.

Limitation under Section 18 of the Limitation Act, 1963 - acknowledgment in writing as extending limitation - remand for fresh consideration - The applicability of Section 18 of the Limitation Act to the materials on record was not examined by NCLAT and therefore the matter is remanded for fresh consideration in light of settled principles. - HELD THAT: - The Court noted the settled principles governing Section 18 - that acknowledgment in writing can extend the period of limitation - and referred to the line of authorities clarifying its scope, including treatment of documentary entries as potential acknowledgments. Since NCLAT did not apply these principles to the pleaded letters, cheques and banker's intimation, the Supreme Court directed a fresh consideration by NCLAT applying the legal tests and authorities indicated by the Court. [Paras 10]

Matter remanded to NCLAT for fresh consideration of limitation and applicability of Section 18 in the light of the observations and authorities indicated.

Final Conclusion: The appeal is allowed; the impugned order of NCLAT is set aside and the matter is remanded to NCLAT for fresh consideration of limitation and the relevance of the letter, cheques and banker's intimation under Section 18 of the Limitation Act; no order as to costs.

Approved resolution plan under Section 31 of the I&B Code binds the corporate debtor and all stakeholders - claims not provided for in an approved resolution plan stand extinguished - statutory dues extinguished if not part of the resolution plan - challenge to resolution plan must be pursued before appropriate insolvency forum

Approved resolution plan under Section 31 of the I&B Code binds the corporate debtor and all stakeholders - claims not provided for in an approved resolution plan stand extinguished - statutory dues extinguished if not part of the resolution plan - Effect of an approved resolution plan on claims by Central/State/local authorities and on statutory dues not provided for in the plan. - HELD THAT: - The Court applied the Apex Court's pronouncement that once a resolution plan is duly approved by the Adjudicating Authority under sub section (1) of Section 31, the claims as provided in the resolution plan stand frozen and the resolution plan is binding on the corporate debtor and all stakeholders, including the Central Government, State Government or any local authority. The Court noted that the Apex Court has held that dues, including statutory dues, if not part of the approved resolution plan, stand extinguished and no proceedings in respect of such pre approval dues may be continued. Having regard to the admission of the application under Section 7, confirmation of the IRP and the NCLAT and Supreme Court orders upholding the resolution, the Court concluded that the State's demand falls within the category of claims extinguished by the approved resolution plan and that the State's remedy was to contest the insolvency process before the competent forum rather than proceed thereafter.

The Court held that an approved resolution plan under Section 31 binds the corporate debtor and all stakeholders and extinguishes pre approval claims not included in the plan, including statutory dues.

Challenge to resolution plan must be pursued before appropriate insolvency forum - quashing of demand orders inconsistent with approved resolution plan - Validity of the impugned demand notices and orders issued by the State in light of the approved resolution plan. - HELD THAT: - Relying on the binding effect of the approved resolution plan and the appellate orders upholding that plan, the Court examined the impugned demand notices and concluded they were contrary to the settled legal position and the approved resolution. The Court observed that the State had not impugned the approval of the resolution plan before the insolvency authorities and that the appropriate course, if aggrieved, was to pursue legal remedies against the resolution process. In consequence, the Court found the impugned demand orders could not be sustained.

The impugned demand orders and related communications are quashed and set aside as being inconsistent with the approved resolution plan.

Final Conclusion: Writ petitions allowed; impugned demand orders and communications set aside on the ground that an approved resolution plan under Section 31 binds all stakeholders and extinguishes pre approval claims not included in the plan; State free to pursue any available legal remedy.

Equality among similarly situated creditors - differential treatment between financial and operational creditors - liquidation value protection for operational creditors - commercial wisdom of the Committee of Creditors - approval of resolution plan

Equality among similarly situated creditors - differential treatment between financial and operational creditors - no pari passu requirement between classes - Differential percentages payable to Financial Creditors and Operational Creditors in a resolution plan do not amount to illegality merely because the percentages differ across classes. - HELD THAT: - The Tribunal applied the principle that equality is required only among similarly situated creditors and that there is no rule requiring identical percentage recovery across different classes of creditors. Reliance was placed on the reasoning in Essar Steel (2020) 8 SCC 531 that Regulation and the Code permit differential treatment of financial and operational creditors, and that the Committee of Creditors' commercial judgment in negotiating and accepting a plan involving differential distribution is entitled to deference. The Court noted that operational creditors have the protection of not receiving less than liquidation value, but that this does not impose a requirement that their recovery percentage match that of financial creditors. Given these principles, differing recovery percentages per se do not vitiate the approval of a resolution plan.

The approval of the resolution plan was not rendered illegal by the fact that operational creditors were to receive a lower percentage than financial creditors; the challenge on this ground fails.

Liquidation value protection for operational creditors - commercial wisdom of the Committee of Creditors - approval of resolution plan - The challenge that the Resolution Plan is arbitrary or discriminatory and therefore liable to be set aside was rejected. - HELD THAT: - The Appellant did not contend that it would receive less than its liquidation value under the plan. The Tribunal observed that the Committee of Creditors - dominated by unsecured financial creditors in this case - had accepted the terms of the plan, and that there was no demonstrable arbitrariness or inequality sufficient to invalidate the Adjudicating Authority's approval. Applying the settled standard that the commercial decision of the requisite majority of the Committee is to be respected where statutory protections are met, the Tribunal found no basis to interfere with the approval.

The allegation of arbitrariness and inequality in the distribution was dismissed and the Resolution Plan's approval was upheld.

Final Conclusion: The Appeal is dismissed; the Adjudicating Authority's approval of the Resolution Plan is upheld as lawful, there being no requirement of identical recovery across creditor classes and no demonstrated arbitrariness or shortfall below liquidation value for operational creditors.

Service of demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational debt as defined in Section 5(21) of the Insolvency and Bankruptcy Code, 2016 - effect of a civil court decree on the character of an underlying operational debt - invocation of insolvency remedy against a going concern - overriding effect of the Insolvency and Bankruptcy Code (non-obstante clause)

Service of demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - Notice in Form-3 dated 06.04.2019 was validly sent to and received by the Corporate Debtor and the Adjudicating Authority rightly proceeded without rejecting the Section 9 application for alleged non-service. - HELD THAT: - The Form-3 demand notice was addressed to the correct address of the Corporate Debtor (54-A, Sainik Farm, Khanpur, New Delhi) as reflected in the notice on record. The discrepancy in the India Post receipt which showed '24' instead of '54-A' was a clerical mistake by postal authorities and does not negate that the notice was issued to the correct address. The Corporate Debtor itself referred to the Section 8 notice in its Section 9 reply and did not plead non-receipt; there was therefore no specific denial of service before the Adjudicating Authority. On these facts the Tribunal found that service was effected and the Adjudicating Authority did not err in admitting the application on this ground. [Paras 6, 7, 8]

The challenge to admission of the Section 9 application on the ground of non-service of the Section 8 notice is rejected.

Operational debt as defined in Section 5(21) of the Insolvency and Bankruptcy Code, 2016 - effect of a civil court decree on the character of an underlying operational debt - maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - overriding effect of the Insolvency and Bankruptcy Code (non-obstante clause) - The claim based on supply of goods, though reduced to a civil court decree, remained an operational debt and the Section 9 application based on that claim was maintainable. - HELD THAT: - The underlying transaction was supply of polypropylene by the Operational Creditor to the Corporate Debtor and therefore falls squarely within the definition of operational debt under Section 5(21). The fact that the Operational Creditor obtained a civil court decree for recovery does not alter the nature of the debt as arising from supply of goods; Form-3 itself contemplates annexing particulars of any adjudication. Pre-existing or pending execution proceedings in civil courts do not bar invocation of the Code, particularly in view of the non-obstante provision giving the Code overriding effect. Authorities cited by the Appellant were distinguishable on facts (limitation bar, allegations of mala fides or different creditor classifications) and do not support rejecting the Section 9 application in the present case. [Paras 14, 15, 16, 17, 18]

The Section 9 application was maintainable because the claim constituted an operational debt and the pendency of execution proceedings or existence of a civil decree did not defeat the application.

Invocation of insolvency remedy against a going concern - The fact that the Corporate Debtor was a going concern did not render the Section 9 application non-maintainable. - HELD THAT: - Being a going concern does not immunize a corporate entity from insolvency proceedings where it has failed to discharge its debt. The Tribunal held that inability to pay an operational debt permits the Operational Creditor to invoke Section 9 irrespective of the Corporate Debtor's status as a going concern; therefore this contention could not undermine admission of the Section 9 application. [Paras 19]

The objection that the Corporate Debtor's continuing business operations precluded the Section 9 petition is rejected.

Final Conclusion: All challenges to the Adjudicating Authority's order admitting the Section 9 application were dismissed: service of the Section 8 notice was held to be proved, the claim was held to be an operational debt and the pendency of civil proceedings or the Corporate Debtor's status as a going concern did not render the Section 9 application unmaintainable. The appeal is dismissed with no order as to costs.

Replacement of Resolution Professional - Locus of an operational creditor to seek replacement of a Resolution Professional - Adjudicating Authority jurisdiction under Section 60(5) of the IBC - Disciplinary jurisdiction of the Insolvency and Bankruptcy Board of India - Complaint, inspection and disciplinary procedure under the IBBI framework (Sections 217-220)

Replacement of Resolution Professional - Locus of an operational creditor to seek replacement of a Resolution Professional - Adjudicating Authority jurisdiction under Section 60(5) of the IBC - An operational creditor does not have locus to file an application for replacement of the Resolution Professional under Section 27; replacement is the prerogative of the Committee of Creditors and governed by Section 27. - HELD THAT: - The Tribunal held that Section 27 expressly provides for replacement of a resolution professional by the Committee of Creditors and prescribes the procedure for such replacement. Section 60(5) confers the Adjudicating Authority jurisdiction over questions of priority or questions of law or fact arising out of insolvency resolution or liquidation proceedings, but it is not a plenary provision to permit any person to seek replacement of a resolution professional where a specific mechanism (Section 27) exists. Therefore an application by a stakeholder other than the Committee of Creditors seeking displacement of the resolution professional is not maintainable. The ingredients and exclusivity of Section 27(1) were held to be self explanatory and admit no exception, requiring adherence to the statutory scheme for replacement through the Committee of Creditors and confirmation processes prescribed therein. [Paras 24, 25]

Application by the operational creditor for replacement of the Resolution Professional is not maintainable; replacement is to be effected under Section 27 by the Committee of Creditors.

Disciplinary jurisdiction of the Insolvency and Bankruptcy Board of India - Complaint, inspection and disciplinary procedure under the IBBI framework (Sections 217-220) - Disciplinary action against an Insolvency Professional lies with the IBBI and its disciplinary mechanism; the Adjudicating Authority cannot initiate or enforce disciplinary proceedings against an IRP/RP. - HELD THAT: - The Tribunal noted that the statutory scheme contemplates filing of complaints to the IBBI and confers powers on the IBBI to direct inspection or investigation and to constitute disciplinary committees which may impose penalties if satisfied of sufficient cause. The adjudicatory forum therefore is not the competent authority to conduct disciplinary proceedings against an IRP/RP; complaints and any consequent disciplinary action must proceed through the IBBI's prescribed procedure. The Tribunal endorsed the view that enforcement of disciplinary action against an IRP/RP is the domain of IBBI under the relevant provisions and regulations, and that the Adjudicating Authority is not to be treated as a disciplinary authority in that regard. [Paras 6, 7, 26, 27]

Allegations of misconduct against the Resolution Professional must be pursued before the IBBI under its complaint and disciplinary provisions; the Adjudicating Authority cannot itself initiate disciplinary proceedings.

Final Conclusion: The appeal is dismissed; the Tribunal affirmed that the statutory scheme confines replacement of a Resolution Professional to the Committee of Creditors under Section 27 and that disciplinary proceedings against an insolvency professional fall within the IBBI's jurisdiction and procedure.

Admission of application under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 - Insolvency Resolution Process against a personal guarantor - Appointment of Resolution Professional under Section 97 of the Insolvency and Bankruptcy Code, 2016 - Moratorium in respect of the debtor under Section 101 of the Insolvency and Bankruptcy Code, 2016 - Invitation and verification of claims and preparation of list of creditors - Preparation and submission of repayment plan and conduct of creditors' meeting

Admission of application under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 - Insolvency Resolution Process against a personal guarantor - Application under Section 94(1) of the IBC, 2016 filed by the personal guarantor was admitted and the Insolvency Resolution Process against the Applicant/Debtor was initiated. - HELD THAT: - The Tribunal considered the report dated 21.02.2022 filed by the Resolution Professional, which recorded that (i) the corporate debtor had admission proceedings under Section 10 of the IBC; (ii) the debt did not fall within the exception mentioned in the relevant proviso; (iii) the applicant was not an undischarged bankrupt or undergoing bankruptcy/fresh start process; (iv) no application under Chapter III had been admitted against the applicant in the preceding twelve months; (v) the application was filed in Form A; and (vi) the applicant furnished the information and demand notices as required under the Code. Relying on the reasons recorded in the RP's report and after hearing counsel and perusal of the record, the Tribunal admitted CP(IB) No. 126/BB/2021 under Section 100 and thereby initiated the Insolvency Resolution Process against the personal guarantor. [Paras 4, 6, 7, 13]

Application under Section 94(1) admitted and Insolvency Resolution Process against the Applicant/Debtor initiated.

Moratorium in respect of the debtor under Section 101 of the Insolvency and Bankruptcy Code, 2016 - A moratorium was declared upon admission, with its scope and duration specified. - HELD THAT: - Upon admission, the Tribunal replaced the interim moratorium with a moratorium commencing from the date of admission and continuing for 180 days as provided under the Code. The order records the effect of the moratorium, namely stay of pending legal proceedings in respect of any debt, prohibition on creditors initiating legal actions in respect of any debt, and restriction on the debtor transferring, alienating, encumbering or disposing of assets or legal rights, subject to any transactions notified by the Central Government in consultation with financial sector regulators. [Paras 7, 8]

Moratorium declared for 180 days from the date of admission with the statutory effects recorded.

Appointment of Resolution Professional under Section 97 of the Insolvency and Bankruptcy Code, 2016 - Invitation and verification of claims and preparation of list of creditors - Preparation and submission of repayment plan and conduct of creditors' meeting - Directions were issued to the Resolution Professional regarding publication of notice, registration and verification of claims, preparation of list of creditors, formulation and submission of a repayment plan, and conduct of creditors' meeting if required. - HELD THAT: - The Tribunal directed the Resolution Professional already appointed by earlier order to publish a public notice within seven days of uploading the order, inviting claims to be registered under Section 103 within 21 days and containing information required by Section 102(2); to furnish copies of the notice to the Registry; to prepare the list of creditors within 30 days from the date of notice in exercise of powers under Section 104; and to assist the debtor to prepare a repayment plan under Section 105. The RP was required to submit the repayment plan and his report thereon within 21 days from the last date for submission of claims as provided under Section 106. If the RP considered that a meeting of creditors was unnecessary, reasons were to be recorded; if a meeting was to be summoned, the RP was to comply with the timelines and notice requirements in Section 106(3) and Section 107, and to conduct the meeting in accordance with Sections 108-111 and report under Section 112. The RP was also directed to perform duties in compliance with the Code of Conduct in Section 208 and to submit periodic reports to the Tribunal. [Paras 9, 10, 11, 12, 14]

Resolution Professional directed to carry out statutory steps of notice, claims verification, list preparation, repayment-plan formulation and creditors' meeting procedures in accordance with the Code and to submit periodic reports.

Final Conclusion: The Tribunal admitted the application under Section 94(1) of the IBC, 2016 and initiated the Insolvency Resolution Process against the personal guarantor; a 180 day moratorium was declared from the date of admission; and the appointed Resolution Professional was directed to undertake statutory steps for claims invitation, creditors' list preparation, formulation and submission of a repayment plan, and conduct of creditors' meeting as per the Code.

Maintainability of consolidated operational debt claim - limitation for filing application under section 9 of the IBC - proof of operational debt and entitlement to retention money - pre-existing dispute as a bar to initiation of CIRP - admission of corporate insolvency petition and declaration of moratorium

Maintainability of consolidated operational debt claim - The C.P. is maintainable despite clubbing two operational claims so long as the parties are the same and the claim satisfied the threshold existing at the time of filing. - HELD THAT: - The Tribunal observed that there is no bar under the IBC to filing a single corporate petitioner where the Operational Creditor and Corporate Debtor are the same and the total claim meets the statutory threshold in force when the petition was filed. As the instant petition was filed before enhancement of the minimum threshold to Rs. One Crore, the consolidated claim met the relevant requirement and therefore maintainability is not barred on the ground of clubbing the claims. [Paras 13]

Maintainable.

Limitation for filing application under section 9 of the IBC - The petition was filed within the three year limitation period in respect of the invoiced claims and the retention money claim. - HELD THAT: - The Tribunal found that the last invoice for the Nitesh Flushing Meadows project was issued on 23.03.2015 and the C.P. was filed on 09.01.2018, which falls within the three year limitation period. For the retention money relating to the Nitesh Logos project, the limitation period commenced on 07.03.2016 (expiry of 12 months from the last bill dated 07.03.2015), and the petition filed on 09.01.2018 was also within three years. Accordingly, the claims before the Tribunal were not time-barred. [Paras 14]

Within limitation.

Proof of operational debt and entitlement to retention money - locus to sue where contract is in name of different legal entity - The petitioner failed to establish entitlement to the claim pertaining to the work order issued in the name of another entity, but proved the claim to the extent of the retention money for the Nitesh Logos project along with interest. - HELD THAT: - The Tribunal noted that the work order dated 20.07.2011 was issued in favour of M/s Sree Vinayaka Constructions and no document was filed to demonstrate transfer or assignment to the petitioner company; consequently that part of the claim in respect of Nitesh Flushing Meadows could not be maintained by the petitioner. By contrast, the retention money relating to the Nitesh Logos project was shown to have been due and unpaid after expiry of the defect/liability period and the respondent had paid all other dues; further there was no specific communication from the respondent pointing to any outstanding defect linked to withholding the retention amount. Applying the principle that retention money becomes payable on expiry of the defect-liability period where no specific outstanding defects are shown, the Tribunal held the petitioner entitled to the retention sum and interest thereon. [Paras 16, 17]

Part of the petition dismissed for want of locus in respect of the work order issued to another entity; petitioner entitled to the retention money claim with interest.

Pre-existing dispute as a bar to initiation of CIRP - Allegations of defects in performance did not constitute a pre-existing dispute sufficient to deny the retention money claim where no specific defect was linked to withholding that sum. - HELD THAT: - The Tribunal distinguished general assertions of defective work from a concrete pre-existing dispute specific to the retention money. It found that once the maximum period from completion had expired and no specific demand or communication remained outstanding pointing to unfinished or defective work affecting the retention amount, mere mention of defects could not be treated as a bar to payment. Therefore, there was no pre-existing dispute with respect to the retention money claim that would preclude admission of the petition to that extent. [Paras 18]

No pre-existing dispute as regards the retention money; claim admissible.

Final Conclusion: The Tribunal admitted the corporate insolvency petition only to the extent of the proved claim (retention money and interest), declared moratorium under Section 14 of the IBC, and appointed an Interim Resolution Professional with directions to proceed in terms of the Code.

Sale of corporate debtor as going concern under Regulation 32A of IBBI (Liquidation Process) Regulations, 2016 - liquidator's powers under the Insolvency and Bankruptcy Code, 2016 - stakeholder committee approval and voting share - value maximisation of liquidation estate

Sale of corporate debtor as going concern under Regulation 32A of IBBI (Liquidation Process) Regulations, 2016 - stakeholder committee approval and voting share - value maximisation of liquidation estate - Permission to the liquidator to sell the corporate debtor as a going concern. - HELD THAT: - The liquidator filed an application under Sections 35(1)(N) and 60(5)(C) of the IBC, 2016 read with Regulation 44(2) and seeking permission to sell the corporate debtor as a going concern under Regulation 32A. The record shows the Stakeholder Committee on 11.11.2021 approved the proposal with more than 83.37% voting share. Several assets of the corporate debtor have already been realised through e-auctions during the liquidation process and proceeds distributed to stakeholders; two ongoing projects remain which require resources and time to complete. The Tribunal found that selling the remaining projects as a going concern would promote value maximisation for stakeholders and that the stakeholders have consented to the proposal. On these findings the Tribunal granted the liquidator permission to effect the sale as a going concern. [Paras 2, 6, 7]

Application IA-5561/2021 allowed and the liquidator permitted to carry out the sale of the corporate debtor as a going concern.

Final Conclusion: The Tribunal allowed the liquidator's application and permitted the sale of the corporate debtor as a going concern to effect value maximisation; other pending applications listed for physical hearing on 18.04.2022.

Authority of deputed officers under the Prevention of Money Laundering Act - authorization by Central Government under Section 45(1A) of PML Act - appointment and powers of authorities under Section 49 of PML Act - classes of authorities under Section 48 of PML Act - provisional attachment under Section 5(1) of PML Act - taking cognizance on police report/charge-sheet

Authority of deputed officers under the Prevention of Money Laundering Act - authorization by Central Government under Section 45(1A) of PML Act - appointment and powers of authorities under Section 49 of PML Act - classes of authorities under Section 48 of PML Act - Validity of filing the complaint by the Assistant Director (an officer on deputation) under the PML Act - HELD THAT: - The court held that the officer deputed to the Enforcement Directorate and posted as Assistant Director, having been appointed by the Central Government under Section 49(1) and falling within the classes of authorities enumerated in Section 48, is an authorised officer for the purposes of the PML Act. The notifications produced (including the general order dated 11.11.2014 empowering officers not below the rank of Assistant Director to file complaints under Section 45) and the specific deputation/appointment order placing the police officer in the Assistant Director post establish that he acquired authority to investigate and to file the complaint under Section 45(1A). Consequently, the contention that a deputed Group B police officer was without authority to file the complaint or investigate was rejected. [Paras 22, 23, 28]

The complaint filed by respondent No.2 as Assistant Director is valid; respondent No.2 is an authorised officer under the PML Act and competent to file the complaint.

Provisional attachment under Section 5(1) of PML Act - appointment and powers of authorities under Section 49 of PML Act - Challenge to the appointment of the Deputy Director who issued the provisional attachment and the validity of that exercise in these proceedings - HELD THAT: - The court observed that the provisional attachment order passed under Section 5(1) is an administrative order which has already been challenged before the appellate tribunal and that the appellate tribunal's proceedings (including interim orders) lie outside the scope of this writ petition. The petition did not properly challenge the provisional attachment order before this Court; moreover, the court referred to precedent upholding provisional attachment orders by Deputy Directors and found no ground in the present petition to invalidate the appointment or the attachment exercise in question. [Paras 25, 29]

The petitioner's challenge to the Deputy Director's appointment and to the provisional attachment cannot be sustained in this writ petition; no interference was warranted.

Taking cognizance on police report/charge-sheet - Whether the Special Court failed to apply its mind while taking cognizance of the offences on the basis of the charge-sheet/complaint - HELD THAT: - Relying on the Supreme Court authority examined in the judgment, the court reiterated that when cognizance is taken on a police report or charge-sheet, the Magistrate/Special Court has the materials collected during investigation before it and is not required to record elaborate reasons when issuing process. The Special Court had perused the charge-sheet and materials and took cognizance against the accused; therefore the submission that the court did not apply its mind or give a detailed order was not tenable. [Paras 26, 27]

The Special Court's order taking cognizance on the charge-sheet is not vitiated for want of detailed reasons and the contention to the contrary is rejected.

Final Conclusion: The writ petition is dismissed. The deputation/appointment of the officers as authorities under the PML Act and the filing of the complaint by the Assistant Director are held valid; the challenge to the Deputy Director's provisional attachment is not maintainable in these proceedings, and the Special Court's cognizance on the charge-sheet does not call for interference.

Sales tax exemption under Industrial Policy Resolution - capping of exemption at 75% of fixed capital investment - eligibility certificate and Form I-D (92) - concessional rate of tax by production of Form-IV - interaction of benefits under IPR and concessions under the OST Act

Sales tax exemption under Industrial Policy Resolution - capping of exemption at 75% of fixed capital investment - eligibility certificate and Form I-D (92) - interaction of benefits under IPR and concessions under the OST Act - Whether the raw material purchases claimed as exempt should be taxed at 16% instead of the 4% rate claimed by the petitioner, having regard to the exhaustion of the exemption ceiling under the IPR-92. - HELD THAT: - The Court noted that the petitioner was entitled to exemption under IPR-92 subject to a ceiling of 75% of fixed capital investment. For AY 1997-98 the petitioner had already availed benefits under IPR-92 to the extent of Rs. 10,79,821/-, leaving a balance ceiling of Rs. 87,107/-. Consequently, the Assessing Authority was correct to treat the excess purchase claimed on the basis of Form I-D (92) as not within the available exemption and to apply the statutory rate applicable to the commodity (16%). Although subsequent decisions (Luis Packaging) clarify that benefits under an IPR operate over and above OST Act concessions, that principle did not permit the petitioner to claim exemption beyond the unexhausted capped amount for the year in question. The Court found no error in the assessment treating the larger purchase as taxable and upheld the taxability at the applicable rate, subject only to adjustment to the extent of the remaining ceiling amount. [Paras 4, 5, 11, 13, 14]

Answered against the petitioner; the excess purchases were properly subjected to tax at 16%, with adjustment permitted only to the extent of the unexhausted ceiling of Rs. 87,107/-.

Concessional rate of tax by production of Form-IV - eligibility certificate and Form I-D (92) - Whether the petitioner may now be permitted belatedly to produce Form-IV to claim the concessional 4% rate on the purchases for AY 1997-98. - HELD THAT: - The Court observed that at the relevant time the petitioner did not produce Form-IV for the balance amount available under the exemption ceiling and had instead relied upon Form I-D (92) for the larger purchase. Although the legal position was subsequently clarified by earlier decisions, the petitioner cannot at this stage be permitted to supply Form-IV belatedly to alter the assessment position. The Court accepted the Department's contention that failure to furnish the appropriate form at the relevant stage disentitles the petitioner from that relief now. [Paras 9, 10, 11, 12]

Petitioner not permitted to produce Form-IV belatedly; concession at 4% cannot be allowed at this stage.

Final Conclusion: The petition is dismissed; the Tribunal's order upholding the assessment is sustained-tax at the applicable rate on excess purchases is confirmed while only the unutilised exemption ceiling for AY 1997-98 may be adjusted in favour of the petitioner.

Reopening of assessment on basis of audit and inspection reports - jurisdiction to reopen assessment under Section 12(8) of the Orissa Sales Tax Act, 1947 - change of opinion - composite works contract - taxable turnover - exclusion of outward freight when separately charged - transportation charges as part of sale price - probative value of certificate issued by purchaser - finality of first appellate finding - tribunal reversing first appellate finding without fresh adjudication

Reopening of assessment on basis of audit and inspection reports - jurisdiction to reopen assessment under Section 12(8) of the Orissa Sales Tax Act, 1947 - change of opinion - Reopening of assessment under Section 12(8) was challenged as being a mere change of opinion. - HELD THAT: - The Court found that the reassessment was initiated on the basis of the Circle Inspector Sales Tax report and the AG Audit report which objected to the earlier taxation of the contract. Those materials were placed before the Sales Tax Officer and confronted to the assessee during reassessment proceedings. On that factual basis the reopening could not be treated as a mere change of opinion or as beyond jurisdiction. The Court therefore held that the reopening was supported by materials available to the STO and by procedural confrontation of the assessee with those materials. [Paras 7]

Reopening upheld as within jurisdiction; question answered in favour of the Department and against the assessee.

Exclusion of outward freight when separately charged - transportation charges as part of sale price - probative value of certificate issued by purchaser - Whether transport/ delivery charges shown in a certificate must be excluded from taxable turnover when the contract/bill did not separately show those charges. - HELD THAT: - The First Appellate Authority had examined the contract and bills and found they constituted one composite works contract in which supply and stacking (including transportation) were billed as a composite charge, not separately itemised. Sectional protection for excluding outward freight applies only when such costs are separately charged. Where the contractual payment is composite and includes transportation up to stacking, the assessee cannot invoke exclusion. In these circumstances the Tribunal was correct to include transport charges in the taxable turnover; the Railway certificate did not displace the contractual and billing reality accepted by the first appellate order which had attained finality as against the assessee. [Paras 8, 9, 10, 11, 12]

Transport charges are includible in taxable turnover; questions B and C answered in favour of the Department and against the assessee.

Composite works contract - tribunal reversing first appellate finding without fresh adjudication - finality of first appellate finding - Whether the Tribunal was justified in treating the entire contract consideration as sale of ballast (taxable at higher rate) and in substituting its reasons for those of the ACST. - HELD THAT: - Given the First Appellate Authority's finding that the contract was a composite works contract (supply plus transportation) and that the costs were not separately shown, the Department could not legitimately treat the whole consideration as sale of ballast. The Tribunal's reversal - treating the entire sum as sale consideration attracting higher tax - ignored the composite nature of the contract and the ACST's reasoned order which had the effect of finality as to the assessee. On merits the Court found no justification for reopening the assessment to recharacterise the contract as pure sale; accordingly the Tribunal erred in substituting its conclusion for that of the ACST without proper basis. [Paras 13]

Tribunal's reversal set aside; ACST's order affirmed and STO's and Tribunal's orders quashed.

Adjustment of tax paid - Consequences as to tax payments following disposition of the revisions. - HELD THAT: - The Court directed that amounts of tax already paid by the assessee be adjusted when raising the final demand or by refund of any excess, in accordance with applicable rules. This is a consequential administrative direction flowing from the disposal of the revision petitions. [Paras 14]

Amount already paid to be adjusted or refunded as per applicable rules.

Final Conclusion: Both revision petitions allowed. The order of the Assistant Commissioner of Sales Tax (first appellate authority) treating the contracts as composite works contracts is affirmed; the reassessment orders of the Sales Tax Officer and the Tribunal's reversal are set aside. Tax paid by the assessee shall be adjusted or refunded in accordance with law.

Priority of secured creditors under SARFAESI - proviso to Section 26E of the SARFAESI Act - notice to secured creditor before attachment - recovery of arrears of tax

Priority of secured creditors under SARFAESI - proviso to Section 26E of the SARFAESI Act - notice to secured creditor before attachment - Validity of the Trial Court's order dismissing the memo seeking issuance of notice to the bank despite an existing charge in the bank's favour - HELD THAT: - The Trial Court rejected the petitioner's memo for issuance of notice to the bank on the view that, because the recovery application sought arrears of tax from the respondent, it was not necessary to issue notice to the bank. The High Court observed that the proviso to Section 26E of the SARFAESI Act - which gives priority to secured creditors after registration of security interest notwithstanding other law - was not placed before the Trial Court. There was no dispute that a charge in favour of the bank existed. In these circumstances the Trial Court's reasoning that notice to the bank was unnecessary was incorrect. The High Court held that, having regard to the proviso to Section 26E and the admitted charge, the memo seeking notice to the bank should have been allowed and the Trial Court's order must be set aside.

Order of the Special JMFC dismissing the memo is set aside and the memo is allowed; the Trial Court erred in refusing to issue notice to the bank.

Notice to secured creditor before attachment - recovery of arrears of tax - Proceedings to be remitted to the Trial Court for further action after issuing notice to the bank - HELD THAT: - The High Court directed that the Trial Court should proceed with the recovery matter in accordance with law after issuing the notice to the bank as sought in the petitioner's memo. The High Court's direction effectively remands the case to the Trial Court for fresh consideration of recovery proceedings, taking into account the bank's status as a secured creditor and any consequences flowing from the proviso to Section 26E.

Matter remitted to the Trial Court with direction to issue notice to the bank and to proceed thereafter in accordance with law.

Final Conclusion: Revision petition allowed; the Special JMFC's order dated 31.08.2018 is set aside, the petitioner's memo for issuance of notice to the bank is allowed, and the Trial Court is directed to issue notice to the bank and proceed with the recovery proceedings in accordance with law.

Recovery of arrear demand - stay of demand - appeal remedy under Section 77(1) - revision under Section 79(2) - writ jurisdiction to quash show cause notice - pre-deposit requirement for admission of appeal - recovery as arrears of public demand

Recovery of arrear demand - stay of demand - writ jurisdiction to quash show cause notice - recovery as arrears of public demand - Maintainability of writ petition challenging the notice for initiation of recovery of arrear demand where no stay of the assessment demand is shown to be in operation. - HELD THAT: - The Court held that in absence of any stay of the demand raised by the assessment order, the assessing authority was not precluded from issuing a notice for initiation of recovery proceedings. The petitioner had not placed any order staying the operation of the assessment or produced evidence of deposit in terms of the statutory regime. The notice in question merely contemplated initiation of recovery and called for the assessee's reply; it therefore could not be quashed prematurely by exercise of writ jurisdiction. The statutory scheme contemplates recovery of unpaid amounts as arrears of public demand and prescribes procedures and consequences (interest/penalty) where payment is not made; absent a subsisting stay, interference with initiation of recovery was declined. The Court observed that the petitioner remains entitled to file its reply and participate in the recovery proceedings before the concerned authority. [Paras 6, 9, 10]

Writ petition challenging the notice for initiation of recovery is not maintainable in the absence of a stay of the demand; the petition was not interfered with and the petitioner may participate in the statutory recovery proceedings.

Appeal remedy under Section 77(1) - revision under Section 79(2) - pre-deposit requirement for admission of appeal - Legality of invoking revision under Section 79(2) to challenge an assessment order passed under Section 42 when Section 77(1) provides the remedy of appeal. - HELD THAT: - The Court noted that the statutory scheme grants the right of appeal against assessment orders and that the provisions of Section 77(1) and Section 79(2) operate in different fields. It reiterated the principle that where a statute prescribes a particular remedy that remedy must be availed of in the prescribed manner. The Court observed that the petitioner filed a revision under Section 79(2) against an assessment under Section 42 instead of preferring the statutory appeal and that nothing had been shown to justify treating the revision as substitutive of the appeal. The Court further noted the amended provisions requiring pre-deposit for admission of appeals and that admission of appeal stays realization of the balance if conditions are met; however, the petitioner had not obtained any stay from the competent authority or deposited amounts to attract statutory protection against recovery. [Paras 5, 7, 8]

Petitioner's reliance on revision under Section 79(2) did not bar the assessing authority from initiating recovery; the statutory appellate remedy under Section 77(1) is the appropriate course and the absence of stay or pre-deposit meant no restraint on recovery.

Final Conclusion: The writ petition challenging the recovery notice and seeking quashment of the assessment order was dismissed: in absence of any stay or statutory pre-deposit the assessing authority was entitled to call for initiation of recovery, the challenge to the notice was premature, and the petitioner remains free to reply and participate in the recovery proceedings.

Priority of secured creditors under Section 26E of the SARFAESI Act - Registration of security interest at Central Registry of Securitisation, Asset Reconstruction and Security Interest of India - Overriding effect of registered security interest vis-a -vis State tax attachments - First charge of the State under the KVAT Act

Priority of secured creditors under Section 26E of the SARFAESI Act - Registration of security interest at Central Registry of Securitisation, Asset Reconstruction and Security Interest of India - Overriding effect of registered security interest vis-a -vis State tax attachments - First charge of the State under the KVAT Act - Whether a secured creditor whose security interest was registered prior to the State's recovery proceedings and attachment enjoys priority under Section 26E of the SARFAESI Act over the State's subsequent attachment under the KVAT Act, and whether the State's attachment should be set aside insofar as it affects the properties sold under SARFAESI proceedings. - HELD THAT: - The Court found on the admitted facts that the secured creditor (the bank) had initiated SARFAESI proceedings earlier in time and issued a possession notice on 15.06.2018, and that the bank's creation of security was lodged in the Central Registry prior to 31.07.2018. The Department's recovery notice and attachment followed on 01.08.2018 and 10.08.2018 respectively. Section 26E expressly provides that, after registration of a security interest, debts due to secured creditors shall be paid in priority over all other debts and revenues, taxes and cesses payable to the Central or State Government or a local authority. Applying that provision to the present chronology, the Court held that the bank's registered security interest enjoys overriding priority over the State's subsequently created charge. The State's contention that it was unaware of the bank's charge did not alter the priority conferred by Section 26E where the security had been registered before the State's recovery action. As the State had not enforced its attachment prior to the bank's registered charge taking effect, Section 26E governs and the rights of the secured creditor prevail. The Court limited its observations to the properties that are the subject matter of the sale certificate issued pursuant to the SARFAESI proceedings and directed that, in consequence of setting aside the State's attachment insofar as those assets are concerned, appropriate revenue entries be dealt with according to law and procedure. [Paras 12, 13, 15, 16, 17]

The attachment order dated 10.08.2018 made by the Department of Commercial Taxes is set aside insofar as it affects the properties subject to the sale certificate issued under the SARFAESI Act; respondents are to take suitable action regarding transfer of revenue entries as per law.

Final Conclusion: The writ petition is disposed of by setting aside the State's attachment in respect of the properties covered by the sale certificate issued under the SARFAESI Act, the Court holding that the bank's earlier registered security interest enjoys priority under Section 26E and overrides the subsequent charge created by the State; directions were given to deal with revenue entries in accordance with applicable procedure.

Acceptance of Form IV declarations by selling dealer - Burden on selling dealer to verify purchaser's manufacturing status - Liability for misuse of concessional declaration rests on purchasing dealer - Section 9-B(3) prohibition on collecting excess tax - 5th proviso to Section 5(1) - purchaser to pay difference if goods used outside State - Entry 48 (now Entry 81) of List 'C' - declaration for goods used in manufacturing/processing - First point levy on timber and its effect on concessional rate - Principle in State of Orissa v. Titaghur Paper Mills regarding manufacture and single-point taxation

Acceptance of Form IV declarations by selling dealer - Burden on selling dealer to verify purchaser's manufacturing status - Principle in State of Orissa v. Titaghur Paper Mills regarding manufacture and single-point taxation - Entry 48 (now Entry 81) of List 'C' - declaration for goods used in manufacturing/processing - The Tribunal erred in rejecting the Form IV declarations furnished by purchasing dealers (saw mill owners) for purchase of logs; the selling dealer was not obliged to investigate the purchasers' manufacturing or processing activities before accepting Form IV. - HELD THAT: - The Court found nothing on record to enable the Tribunal or this Court to conclude that the saw mill purchasers did not subject the logs to manufacturing or processing; that question was one for the Assessing Officer to enquire into. The declaration in Form IV expressly states the goods will be used in manufacturing/processing for sale, and it is reasonable for a selling dealer to act on that declaration rather than undertake an investigation into its correctness. Precedents of this Court were relied upon to hold that it would be an impossible burden on the selling dealer to verify how the purchasing dealer utilises the goods purchased on the strength of the declaration. Accordingly, the Tribunal's rejection of the Form IV declarations was held to be in error. [Paras 9, 10, 11, 13]

Form IV declarations furnished by the purchasing saw mill dealers were valid for the selling dealer to accept; the Tribunal's rejection of those declarations is set aside.

5th proviso to Section 5(1) - purchaser to pay difference if goods used outside State - Liability for misuse of concessional declaration rests on purchasing dealer - Section 9-B(3) prohibition on collecting excess tax - First point levy on timber and its effect on concessional rate - The Petitioner did not contravene the 5th proviso to Section 5(1) of the OST Act or Entry 48 of List 'C' (now Entry 81); liability for any misuse of the concessional declaration lies on the purchasing dealer and not on the selling dealer. - HELD THAT: - The proviso to Section 5(1) contemplates that where a purchasing registered dealer uses goods otherwise than as declared (for use outside the State), the purchasing dealer must pay the difference in tax. Hence, any contravention of that proviso must be pursued against the purchasing dealer. Moreover, the selling dealer faced a statutory constraint under Section 9-B(3) against collecting excess tax; declining to accept Form IV could have put the selling dealer in jeopardy of over-collecting. The Court confined this conclusion to the period 1st January, 1990 to 31st March, 1990 when timber was a first point sale item and held that the Department should proceed against purchasers if they had not used the goods as declared. [Paras 12, 14]

Petitioner did not contravene the 5th proviso to Section 5(1) or Entry 48/Entry 81; any liability for misuse of the concessional declaration rests with the purchasing dealers.

Final Conclusion: The impugned orders of the Tribunal, the STO/AO and the Appellate Authority are set aside; the revision petition is allowed in favour of the petitioner. If any refund arises on giving tax effect to this judgment, it shall be made within eight weeks in accordance with the Rules.

Jurisdiction of Micro and Small Enterprises Facilitation Council under Section 18 of the MSME Act - applicability of the MSME Act where supplier is registered after execution of the contract - choice of law clause and applicability of laws prevailing at the time of contract - territorial applicability of the MSME Act where the buyer is located outside India

Jurisdiction of Micro and Small Enterprises Facilitation Council under Section 18 of the MSME Act - applicability of the MSME Act where supplier is registered after execution of the contract - choice of law clause and applicability of laws prevailing at the time of contract - Whether the Council had jurisdiction to entertain the dispute between the appellant and the respondent - HELD THAT: - The contract between the parties was executed on 24.08.2020 and contained a choice of law clause providing that the agreement shall be governed by the laws of India prevailing at the time of the contract. Under Section 2(n) read with Section 8 of the MSME Act the provisions of the Act apply where the supplier has filed the prescribed memorandum and is registered as an MSME with the appropriate authority. The appellant was registered as an MSME only on 28.08.2020, after the contract was executed. Consequently, at the time of entering into the contract the supplier was not an MSME within the meaning of the Act and the parties could not be said to be governed by the MSME Act for the purpose of invoking the Council's jurisdiction under Section 18. Applying these facts to the statutory scheme, the Court held that the Council lacked jurisdiction to entertain the dispute between the appellant and the respondent under Section 18 of the MSME Act. [Paras 8, 9]

Council had no jurisdiction to entertain the dispute; the appeal is dismissed.

Territorial applicability of the MSME Act where the buyer is located outside India - applicability of the MSME Act where supplier is registered after execution of the contract - Larger questions on applicability of the MSME Act where the buyer is located outside India and where supplier obtains MSME registration after contract execution - HELD THAT: - The Court expressly declined to decide broader questions whether the MSME Act applies when a buyer located outside India has availed services or done business in India or whether subsequent registration of the supplier as an MSME confers jurisdiction on the Council. Those issues were noted but left open for consideration in an appropriate case, having regard to Section 18, Section 8 of the MSME Act and earlier precedents. [Paras 8]

Larger territorial and temporal questions left open for future adjudication.

Final Conclusion: The Supreme Court affirmed the High Court's conclusion that the Micro and Small Enterprises Facilitation Council had no jurisdiction to entertain the dispute between the parties on the facts before it (contract executed before supplier's MSME registration); the appeal is dismissed with no order as to costs.

Section 311 Cr.P.C. - recall and re-examination of witness - surprise testimony and right to meet new evidence - fair trial and opportunity to accused

Section 311 Cr.P.C. - recall and re-examination of witness - surprise testimony - fair trial and opportunity to accused - Application under Section 311 Cr.P.C. to permit the petitioner to further cross-examine the complainant was to be allowed because new facts surfaced in the examination-in-chief of a subsequently produced witness who was not mentioned in the complaint. - HELD THAT: - The complaint did not list CW 2 as a witness and the complainant (CW 1) in his examination in chief did not disclose the facts later deposed to by CW 2. CW 2's affidavit evidence introduced, for the first time, material facts about the source and delivery of amounts said to constitute the loan; these facts were not pleaded in the complaint and thus amounted to a surprise to the accused. Section 311 Cr.P.C. confers wide discretion on the trial Court to summon, recall or re examine witnesses when their evidence appears essential for a just decision. Ensuring a fair trial requires that the accused be granted an opportunity to meet new evidence and to further cross examine previously examined witnesses on matters newly sprung during trial. Having found that material new facts surfaced in CW 2's examination in chief and that the petitioner was taken by surprise, the interests of justice required that the petitioner be permitted to further cross examine CW 1/complainant on those facts.

The trial Court's order refusing permission under Section 311 Cr.P.C. is set aside and the petitioner is permitted to further cross examine the complainant on the new facts elicited in CW 2's examination in chief.

Final Conclusion: The High Court allowed the revision, set aside the impugned order dated 27.1.2020, and granted the petitioner leave under Section 311 Cr.P.C. to further cross examine the complainant on facts which surfaced for the first time in CW 2's examination in chief.